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What impact does a stock split have on total equity

A stock split will increase the number of shares outstanding while a reverse stock split will decrease the number of shares outstanding. When the company issues a stock split, the par value of the common stock also changes. However, overall equity for the company will remain unchanged.

The example below illustrates the impact of a stock split:


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  • What is a reverse stock split?

    A reverse stock split is when the number of shares outstanding is reduced. The only aspects that are impacted are the number of shares outstanding and the par value per share. As you can see in the visual below, there is no impact to retained earnings and no impact on overall stockholders’ equity.

  • What is a stock split?

    A stock split will increase the number of shares outstanding that a company has and will divide the par value by its split amount. Stock splits will not require a journal entry, but they will require a unique method of computation. The visual below illustrates the calculation to make to the number of outstanding shares. […]

  • What is the journal entry to record a stock split or reverse stock split?

    A journal entry is not required for a stock split or a reverse stock split. These events only impact the number of shares outstanding and the par value of the stock.