Stock splits occur when a company divides its existing shares into multiple shares, effectively lowering the price per share. For example, in a 2-for-1 stock split, each shareholder receives an additional share for every share they currently own. Although the number of shares increases, the overall value of the investment usually remains the same. Stock splits are typically performed to make the shares more affordable to retail investors, increase liquidity in the stock, and attract more buyers. While a stock split may increase the liquidity and trading volume of a company's shares, it does not directly impact the company's financial situation or market value. Investors should be aware that stock splits are purely cosmetic and do not change the fundamental value of the company. Share prices will adjust after a split to reflect the new number of shares outstanding. Understanding how stock splits work can help investors make informed decisions about their investments and take advantage of potential opportunities in the market.