A stock split is a corporate action where the company divides the existing outstanding shares in order to boost the liquidity of shares. The prices of the shares adjust automatically in the stock market when the company implements the action.Reverse stock split is an action that increases the par value of a share, while the total number of the company’s outstanding shares decreases. In this kind of split there is no affect on the net equity capital either.In past years, companies pursued stock splits in order to help brokerage firms, since brokerage firms charge commissions on the basis of the number of shares being traded.

Investors may be concerned whether they are capable of purchasing shares with a high value, but a greater number of shares at a reduced purchase rate per share, after a stock split, makes investors feel comfortable buying the stock. In this way, companies with a higher price may go for a stock split and decrease the rate per share, attracting prospective investors The market is now equipped with software packages that enable people to handle necessary documents related to stock splits. These software packages help people to understand the accounting procedure involved in this process and are available in the market at affordable prices.