A stock split occurs when a company decides to increase the number of its shares in order to enhance the liquidity of its stock. During a stock split, although the total number of outstanding shares is multiplied by a specific factor, the overall value of all outstanding shares remains unchanged as it does not alter the intrinsic worth of the company. The most commonly used split ratios are 2-for-1 or 3-for-1 (sometimes represented as 2:1 or 3:1). This implies that for every share owned prior to the split, each shareholder will possess two or three shares respectively following the split.
