Introduction to Financial Markets (405) — CBSE Class 10 board question

Stock Split is a corporate action in which a company divides its existing shares into multiple shares. For example, in a 2-for-1 split, each existing share becomes two shares, and the share price is halved proportionately.

Key features of a stock split:

• The total number of shares increases, but the market capitalisation remains the same.
• The face value (par value) of each share decreases proportionately.
• Existing shareholders hold more shares, but the underlying value of their investment does not change.
• Companies typically do this to make shares more affordable and liquid for small investors, thereby increasing market participation.

Example: If a company has 1,00,000 shares at ₹100 each (market cap = ₹1 crore), after a 2-for-1 split, it has 2,00,000 shares at ₹50 each (market cap still = ₹1 crore).

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• This is a competency-based question testing application of financial concepts; the examiner expects you to define stock split and explain its mechanics with at least one feature or example.
• Key examiner checklist: definition ✓, number of shares increases ✓, market cap unchanged ✓, face value/price adjusts proportionately ✓.
• The source passages cover securities markets broadly but do not detail stock splits — so apply your standard Class 10 Financial Literacy/Markets knowledge here.
• Avoid writing an essay; 4 crisp points + a brief example is ideal for 4 marks.