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**: For example, in a 2-for-1 stock split, each shareholder receives 2 new shares for every 1 share they previously owned. 2. **Decrease in share price**: The price per share is adjusted proportionally downward. In a 2-for-1 split, the share price would be approximately halved. 3. **No change in market capitalization**: The total market value of the company remains unchanged because the increase in shares is offset by the decrease in price per share. 4. **No change in ownership percentage**: Each shareholder maintains the same proportional ownership in the company. **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 Option A is incorrect**: - A stock split does NOT decrease the number of shares; it increases them - A reverse stock split would decrease shares and increase price **Why Option C is incorrect**: - While the number of shares increases, the price does NOT increase; it decreases proportionally - If both increased, the market capitalization would increase, which doesn't happen in a stock split **Example**: - Before 2-for-1 split: 1,000 shares at $100 each = $100,000 market cap - After 2-for-1 split: 2,000 shares at $50 each = $100,000 market cap The company's value remains the same, just divided into more pieces at a lower price per piece.

Author: LeetQuiz .