A corporation will primarily split its stock to:

Prepare for the Canon Financial Institute CFIRS Exam with flashcards and multiple choice questions. Each question comes with hints and explanations for better understanding. Get ready to excel in your exam!

A corporation primarily splits its stock to make its shares more marketable by decreasing the market price of its stock. When a company performs a stock split, it essentially increases the number of shares outstanding while proportionally reducing the share price. For example, in a 2-for-1 split, a shareholder who previously held one share priced at $100 would now hold two shares priced at $50 each. This reduction in price can enhance the liquidity of the stock by making it more affordable for additional investors, particularly retail investors who may be hesitant to purchase higher-priced shares.

By lowering the price per share, the stock becomes more accessible and attractive to a broader range of potential investors, which can lead to increased trading volume and potentially a more dynamic market for the company's stock. Thus, stock splits are often employed as a strategic move to boost marketability, counteract high stock prices, and maintain an active trading environment.

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