Understanding Stock Splits and Reverse Stock Splits

The video explains the concepts of stock splits and reverse stock splits, detailing how they affect the number of shares and share prices. It emphasizes that the total investment value remains unchanged despite these changes. Through examples and math problems, the video illustrates the effects of stock splits on individual investors and companies. It also discusses the strategic reasons companies might choose to undergo stock splits or reverse stock splits.

What happens to the number of shares in a forward stock split?

• The number of shares decreases.

• The number of shares remains the same.

• The number of shares is halved.

• The number of shares increases.

In a reverse stock split, how does the number of shares change?

• The number of shares increases.

• The number of shares doubles.

• The number of shares decreases.

• The number of shares remains the same.

How does a forward stock split affect the price of each share?

• The price of each share increases.

• The price of each share decreases.

• The price of each share remains the same.

• The price of each share doubles.

What remains unchanged in both forward and reverse stock splits?

• The company's market cap.

• The share price.

• The total value of the investment.

• The number of shares.

In a forward stock split, if Tina originally had 100 shares, how many will she have after a 2-for-1 split?

• 300 shares

• 100 shares

• 50 shares

• 200 shares

After a 1-for-4 reverse stock split, how many shares will Tina have if she originally had 100?

• 75 shares

• 50 shares

• 100 shares

• 25 shares

What happens to the share price in a reverse stock split?

• The share price remains the same.

• The share price increases.

• The share price is halved.

• The share price decreases.

Why might a company choose to undergo a forward stock split?

• To increase the share price.

• To avoid delisting.

• To make shares more affordable for investors.

• To reduce the number of shares.

What is a potential reason for a company to perform a reverse stock split?

• To increase the number of shares.

• To decrease the share price.

• To avoid being delisted.

• To make shares more affordable.

If a company's stock price rises significantly, what might they do to make shares more attractive?

• Perform a reverse stock split.

• Perform a forward stock split.

• Increase the share price.

• Decrease the number of shares.