A stock split changes the number of shares used to represent an ownership interest. In a simplified proportional example, doubling the share count while halving the price per share leaves the total value unchanged at that instant.
Suppose a fictional holding consists of 12 shares at $40 each: $480 in total. A two-for-one split gives 24 shares; an illustrative adjusted price of $20 produces the same $480. Actual market prices can move for other reasons.
Microsoft’s investor-relations FAQ offers a company explanation of this basic split arithmetic. The example here is educational, not a recommendation to buy that or any other stock.
Check both columns
When a finance book presents a split, write down share count and price together. Looking at only one can create a false impression of a sudden gain or loss.
Then check what the example excludes: fees, fractional-share treatment or other corporate-action details may require separate information for an actual holding.
An increased share count is a change in units. Whether an investment subsequently gains or loses value remains another question, which cannot be answered by the split ratio alone.
Try a ratio that is not a simple doubling
For another fictional example, start with ten shares priced at $30 each. Under a three-for-two split, the holding becomes fifteen shares. A purely proportional adjustment gives $20 per share: fifteen times twenty still equals $300. This calculation isolates the unit change; it does not forecast the next traded price.
To check your own arithmetic exercise, multiply the share count by the split ratio and divide the illustrative price by the same ratio. If you change the count without adjusting the price, you have mixed values from two different bases. For an actual corporate action, read its announced terms rather than substituting this classroom model for the broker’s record.