Imagine you're baking a pizza at home. You pull it from the oven and run your pizza slicer through it twice, creating four equally sized pieces.

But what if you want more slices? Not more pizza, just more slices? Easy to solve. Just run your pizza slicer down the middle of each existing slice, and voilà: eight slices instead of four.

This same process works with stocks and stock splits. In this way, companies can reduce their stock price by increasing the number of shares outstanding -- making their shares more accessible to retail investors.

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Source Fool.com