What is the result of a stock split?

A stock split occurs when a company increases the number of its outstanding shares by issuing more shares to current shareholders. This action typically results in a decrease in the price per share, while the overall market capitalization of the company remains unchanged.

For instance, if a company has 1,000 shares outstanding, each valued at $100, its market capitalization is $100,000. If the company executes a 2-for-1 stock split, it will double the number of shares to 2,000, while the price per share will be adjusted to $50. Even though each share is now worth less, the total value of the investment for shareholders remains the same because they now own more shares.

This mechanism allows for shares to become more accessible to a broader range of investors. In summary, the correct choice indicates that with a stock split, the price per share decreases while the number of shares increases, reflecting how splits are designed to maintain the total market value of the company despite the individual price adjustment.