Stock Split question?

Question

What is the effect (increase, decrease or none) of a stock split on the Balance of Common Stock Account ??

Answer 1

Stocksplits don't do anything to the balance of Common Stock or equity account. Stock dividends do change the stock outstanding though.

Answer 2

2:1 splits are easiest to understand, since you simply double things. (this sounds like a ? to a business math problem, and you probably don't need this extra info, but...)
A 2:1 is a foreward split, which is good.
If a stock has a reverse split (1:2), that is bad. A reverse split is what happens when a company is on its last leg. A foreward split is a good sign. It means the share price has increased, and they do it to attract new investors. Take Best Buy and Circuit City. CC is $23 a share, and BBY is $50 a share. BBY looks much more expensive, and often times investors would rather buy 100 shares of CC (for $2,300) than 50 shares of BBY (for $2,500) Simply because they can get 100. Buying under 100 is called 'odd lot.' I often times get letters from companies asking me to either buy more or sell. Example: I got a letter from Radio Shack a little while back because I only own 25 shares. Supposedly it costs *them* money because I only own 25 shares, and they either want me to sell 25, or buy 75 more.

Anyways... a stock split is pretty much for psychological reasons. It is the same as going to the bank and giving the teller, and asking for 2 $50's back. You still have the same amount, and nothing has changed.
If a company splits 2:1, it effects options/warrants, etc... just like it effects the stock.

Also, Google and Yahoo basically do the same thing. But how many people will pay $500 for 1 share of GOOG? Yahoo costs only $25. Higher prices discourage additional investment.

The Balance of Common Stock should be adjusted by the same ratio as the stock split.

(boy, I apparently had nothing to do tonight since I rambled on like that...)

Answer 3

The total amount of shares raise proportionately, like if there are 1 million shares then a 2 for 1 split would result in 2 million shares or a 3 for 1 would result in 3 million shares.
Accordingly, the price adjusts by the same amount on the next trading day for example a 2 for 1 split on a $100 stock will open next day at $50 and so on.

Answer 4

Should be no effect. If I understand your question, you are asking an accounting question...how much does the common stock account increase for a split. Since no additional capital is contributed, or paid out, it should have no effect.