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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.

Stock splits will really only increase the number of shares outstanding. Basically, if the company issues a 2-1 stock split, then the number of outstanding shares will double and the par value of the stock will be cut in half.


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