Split

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Vishnu (Querist)
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19 August 2010 A compnay has declared 16:1 split..Is it a reverse or forward split...Whts the net effect of shares and Earnings Per share.

Thanks

ALLU

ALLU (Expert)
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20 August 2010 hi

Normlly company goes for split , whenever the STOCK PRICES are very high and not available for nomal investors
FORWARD SPLIT

Giving extra shares to holding one

eg:

if you hold 100 shares of company and each worth Rs 200

then total worht is 100*200=RS20000

(compay wants to split the shares due to high value and voltality)

spilt (forward)16:1

then total worth is 1600*12.5=RS20000

That means your Worth will not change

2)EPS=INCOME AVAILABLE FOR INVESTORS/OUSTANDING SHRARES

since denominator increased in FORWARD split the EPS will decrease