Answer: an increase in the number of shares and a decrease in the share price.

## Explanation A stock split is a corporate action where a company divides its existing shares into multiple shares. The key characteristics of a stock split are: 1. **Increase in number of shares**: In a typical stock split (e.g., 2-for-1 split), each existing share is divided into multiple shares. For example, in a 2-for-1 split, each shareholder receives 2 shares for every 1 share they previously owned. 2. **Decrease in share price**: The share price is proportionally reduced to maintain the same total market capitalization. In a 2-for-1 split, the share price would be approximately halved. 3. **No change in total market value**: The total market value of the company remains unchanged. The increase in number of shares is exactly offset by the decrease in share price. 4. **No change in ownership percentage**: Each shareholder's proportional ownership in the company remains the same. **Why option B is correct**: - A stock split increases the number of shares outstanding - The share price decreases proportionally to maintain the same market capitalization - This makes shares more affordable and increases liquidity **Why other options are incorrect**: - **Option A**: Describes a reverse stock split, not a regular stock split - **Option C**: Would increase total market value, which doesn't happen in a stock split **Example**: If a company with 1 million shares at $100 per share (market cap = $100 million) does a 2-for-1 split: - Number of shares becomes 2 million - Share price becomes approximately $50 - Market cap remains $100 million (2 million × $50)

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