Mae's Housewares has 48,000 shares of stock outstanding with a market value of $11 per share. The company has retained earnings of $62,700. The company just announced a 1-for-3 reverse stock split. How many shares of stock will be outstanding after the split?

Question

Quizplus · Accepted Answer

In a 1-for-3 reverse stock split, for every 3 shares an investor holds, they are consolidated into 1 share. Therefore, to find the new number of shares outstanding, divide the original number of shares (48,000) by 3, which equals 16,000 shares.

Mae's Housewares Has 48,000 Shares of Stock Outstanding with a Market