What is a stock split?

A stock split is best defined as a process where a company divides its existing shares into multiple new shares, which is precisely why option B is correct. This action is typically taken to increase the liquidity of the stock, making it more accessible for investors by lowering the individual share price while keeping the overall market capitalization unchanged.

In a stock split, the number of outstanding shares increases, and the price per share adjusts accordingly. For example, in a 2-for-1 stock split, shareholders receive an additional share for each share they own, effectively halving the price of each share. This can make the stock more appealing to a broader range of investors, especially retail investors who might have been deterred by a high share price.

The other options do not capture the essence of a stock split. An increase in a company's debt obligations does not relate to share division; instead, it pertains to financial leverage. A decrease in the total value of a company does not occur during a stock split, as the market capitalization remains constant before and after the split. A type of merger between two companies describes a totally different financial event involving the combination of two entities, which is unrelated to the concept of stock splits.