What is a stock split designed to achieve?

A stock split is specifically designed to decrease the price per share of a company's stock while increasing the number of shares outstanding. This action often aims to improve the stock's liquidity and make it more accessible for investors. When the price per share is reduced, it can attract a larger pool of potential investors who may find the lower price more appealing. For instance, if a stock is priced at $100 and undergoes a 2-for-1 split, each original share is divided into two shares, reducing the price to $50 per share. This can also enhance the trading volume as more investors are able to buy shares at a lower price point.

The other options do not accurately reflect the primary objective of a stock split. Lowering the overall market capitalization is not a direct outcome of a split; the market capitalization remains the same immediately after the split. Increasing dividends paid to shareholders is unrelated, as dividends generally remain distributed based on the total capital rather than the number of shares alone. Although a split increases the number of outstanding shares, the primary reason for performing a stock split is to decrease the price per share, which makes that choice the correct one.