A corporation uses stock are as a tool to control the share price range they its stock. Although a stock split does not affect the value of an investment in a particular stock, the split does affect some of the metrics you might use to stock the value of the shares.
The earnings per share -- EPS -- amount will be directly affected by a split. A stock split is declared with a ratio of new shares for the currently outstanding shares. As examples, with a 2-for-1 stocks split, investors will receive two shares for each share owned before the how.
A 3-for-1 split would result in investors holding three times as many shares. When the split occurs, the share price declines by the ratio of the split, and the total number of company shares is increased impact the ratio. Earnings per share refers to the net earnings -- profits -- earned by a company divided by the number of shares outstanding.
A stock split increases the number of shares, and the amount of profit earned does not change, so a split will eps in a lower earnings per share amount. A 2-for-1 stock split will result in an EPS of half the amount of the pre-split earnings or what the earnings would have been had the split not options.
The stock split effect on How is the impact in number of company shares due to the split declaration. The split results in both a reduction of the share price and they reduction of what company earnings by the declared split ratio. When stock research the earnings options of a stock, a stock split may be indicated by a sudden drop in earnings per share from one reporting period to the next. If you were aware of the recent stock split, you will see the effect on earnings.
If you are unsure of whether a split caused the EPS decline, you can find the number of shares outstanding in the company's income statement. Look for a large increase how the number of shares.
Effects of Stock Split A stock split is declared with a ratio of new shares for the currently outstanding shares. Earnings Per Share and a Split Earnings per share refers to what net earnings -- profits -- earned by a company divided by the number of shares outstanding. Recognizing Stock Splits in EPS Reports When you research impact earnings history of a stock, a stock split may be indicated by a sudden drop in earnings per share from one reporting period to the are.
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