When Crocs, the shoe company, reported in early 2007 that its first-quarter earn

Question

When Crocs, the shoe company, reported in early 2007 that its first-quarter earnings had increased from the previous year, its stock price jumped to over $80 per share. At the same time, the company announced a 2-for-1 stock split.. What is a stock split and what effect does it have on the company’s stockholders’ equity? What effect will it likely have on the market value of the company’s stock? In light of your answers, do you think the stock split is positive for the company and for its stockholders?

Explanation / Answer

Stock Split Ans 1 In stock split, Total number of shares are increased without changing the share capital.Face value of the share gets proportionately reduced in stock split.Companies normally resorts to split to make their share more marketable. Ans 2 Share holders equits would remain unchanged Ans 3 Market value of the company stock per share would get reduced

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