stock split questions

[Bill Carlson]

On Tue, Jan 30, 2001 at 02:44:01AM -0800, Dave Peticolas wrote:
> 
> 1.  Are stock splits always reported as the ratio of two integers?

I have never seen anything but this.

> 
> 2.  If your stock splits in a ratio that doesn't multiply to give
>     you an integral number of shares (say 3 for 2 and you have 3 shares),
>     then you get some cash for the extra share right? Is there a
>     name for that cash disbursement?

I have all seen this called "cash in leiu".  What it really is
(transactionally) is the sale of a small number of shares prior
to the split so that the split itself works correctly.  Sometimes
it is the sale of a fractional share after the split transaction
itself, but I think the prior makes more sense.

Another way to think of splits is as a form of "stock dividend". 
What happens is the company gives you more shares (i.e., 1 share
for every two you hold in a "3 for 2 split").  Obviously in the
market place this results in the revaluation of the shares to
about 2/3 of their previous value.  The reason I put it this way
is that I have long seen a split as simply a transaction in which
you purchase the new shares for zero dollars and then immediately
set the price of all the shares to the approprate (predicted) market
value.  In gnucash to date, I have always done this as two transactions,
but that is not perfect because there is an instantaneous balance of
zero because of the zero cost of the shares.

(There are actually two forms of stock dividend, one is a taxable
event and really like a dividend (as it is a transfer of company assets
to the shareholder), the other is not a taxable event and is 
used for splits.  The former is almost never used.)

		Cheers,

		Bill

> 
> thanks,
> dave
> 
> 
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