Ryan's Auto Parts has 200,000 shares of stock outstanding with a par value of $1 per share and a market value of $10 a share. The company has retained earnings of $86,000 and paid in surplus of $285,000. The company just announced a 2-for-5 reverse stock split. How many shares of stock will be outstanding after the split?

Question

Quizplus · Accepted Answer

In a 2-for-5 reverse stock split, for every 5 shares that an investor holds, they are consolidated into 2 shares. Therefore, to find the new number of shares outstanding, you divide the original number of shares (200,000) by 5 and then multiply by 2: (200,000 / 5) * 2 = 80,000 shares.

Ryan's Auto Parts Has 200,000 Shares of Stock Outstanding with a Par