Chapter 1-8 Stock Splits – Flashcards
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Stock split
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A corporation changes the number of outstanding shares while at the same time adjusts the price per share so that the market cap remains unchanged
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Outstanding shares
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The total number of all shares issued to investors by corporations
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Market capitalization or market cap
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The total value of all of a company's outstanding shares
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Traditional stock split
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A split where the value of a share and the number of shares are changed in such a proportional way that the value decreases as the number of shares increases, while the market cap remains the same
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Reverse stock split
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When the number of outstanding shares is reduced and the market price per share is increased; as the price per share increases, the investor perceives that the stock is worth more
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Penny stock
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A stock whose value is less than $5 per share
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Fractional part of a share
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When a split creates a situation where less than one share remains
