Discuss CSI CSC1 Exam Topic 7 Question 2

What is the main benefit for the investors when a company announces a stock spit?

AAn increase in the shares' affordability.

BAn increase in the shares' market price.

CAn increase in the value of the shareholder stake

DAn Increase in the proportion of the shareholder's stake.

Suggested Answer: A

A stock split reduces the price per share, making the shares more affordable to smaller or retail investors. This does not increase the market capitalization or shareholder value but makes trading easier by improving liquidity and accessibility.

Volume 1, Chapter 8: Equity Securities, section on 'Stock Splits and Consolidations,' describes the purpose and benefits of stock splits for investors, particularly in terms of affordability and liquidity.

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12 comments · newest first

Jacquelyne 10 days ago

I think D is key. More shares, same value.

Olen 15 days ago

Definitely A! More people can buy in.

Julian 20 days ago

A stock split makes shares cheaper.

Craig 25 days ago

Wait, so does this really help investors in the long run?

Luis 1 month ago

It doesn't actually increase value, just the number of shares.

Justine 1 month ago

I think it just confuses people, not sure it's a big deal.

Aleta 1 month ago

Totally agree, it attracts more buyers.

Marta 2 months ago

A stock split makes shares more affordable!

Phung 2 months ago

I lean towards C because it seems like a stock split would increase the number of shares, but the total value stays the same, right?

Royal 2 months ago

I practiced a similar question, and I feel like the answer could be A too, since lower prices might attract more buyers.

Rosalyn 2 months ago

I'm not entirely sure, but I remember something about stock splits not actually increasing the overall value. Maybe it's D?

Nichelle 2 months ago

I think the main benefit is about affordability, so I might go with A. It makes shares more accessible to smaller investors.

CSI CSC1 Exam - Topic 7 Question 2 Discussion