Question

Hungry lunch has net income of $73,402, a price-earnings ratio of 13.7, and earnings per share of $.43. How many shares of stock are outstanding?

Answer 1

The total number of outstanding shares is 170,702.

Further Explanation:  

Outstanding shares:

The outstanding shares are part of the share capital, which is issued and held by the shareholders. The shares that are purchased by the public and other buyers and currently floating shares in the market are known as outstanding shares. It is a liability of the company and shown as the “Capital Stock” in the liabilities side of the balance sheet.

Calculate the number of outstanding shares:

The price-earnings ratio is calculated by dividing the net income with the total number of outstanding shares. The net income is $73,402 and the price-earnings ratio is 13.7. The total number of outstanding shares can be calculated as follows:

\begin{aligned}\text{Price-earnings ratio}&=\frac{\text{Net income}}{\text{Number of outstanding shares}}\\0.43&=\frac{\$73,402}{\text{Number of outstanding shares}}\\\text{Number of outstanding shares}&=\frac{\$73,402}{0.43}\\&=170,702\end{aligned}

Thus, the total number of outstanding shares is 170,702.

Learn More:

1. Learn more about the factors affecting the stock price

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2. Learn more about the effect of the stock on the balance sheet

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3. Learn more about the earning per share

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Answer Details:

Grade: Middle school

Chapter: Share capital

Subject: Accounting  

Keywords: Hungry, lunch, net, income, price-earnings, ratio, earnings, per, share, shares, stock, outstanding, net profit, shares.

Answer 2

Answer: The number of shares outstanding is approximately 170702.32 shares.

We have :

EPS                       $0.43

Net Income       $73,402

The formula for computing EPS is

$EPS = \frac{Net Income}{Number of shares outstanding}$

Substituting the values from the question in the formula above we get,

$Number of shares outstanding = \frac{73402}{0.43}$

$Number of shares outstanding = 170702.3256$