Chipotle Mexican Grill (CMG) is one of the latest companies to announce a "stock split." While you may have heard the term "stock split" before, what exactly does it mean? Yahoo Finance's Brad Smith breaks down the term, how it works, and why companies do it.

A stock split is when a company divides up each share of its stock into a set amount of shares. When a company does a stock split, it increases the amount of outstanding shares and therefore, increases the liquidity of a stock. It also helps lower the stock price, which makes it more accessible to investors.

Key video moments:

00:00:05 - What is a stock split?

00:00:11 - Stock split example

00:00:38 - Stock split process

00:00:51 - Why would a company do a stock split?

For More on stock splits see below:

Chipotle's 50-for-1 stock split just went into effect. Here's what it means for investors

Nvidia announces 10-for-1 stock split. What does this mean?

This post was written by Mariela Rosales.