What is stock split How is it equivalent to paying a dividen

What is stock split? How is it equivalent to paying a dividend?

Solution

Stock Split is a corporate action in which a public company devide one share in different parts, like 5 for 1 stock split mean for each of existing of investor receive five share. Stock split does not affect market capitalization, that market capitalization remains constant before and after stock split. as number of increase after stock split, stock price of company in same proportion.

The primary reason of stock split is to increase the liquidity of the stock. So by reduce the market value of stock company makes the stock tradable more frequently.