Those companies buy back and retire shares, instead of holding them in the treasury. In this way, the number of both issued and outstanding shares is reduced. The number of authorized shares can be substantially greater than the number of shares outstanding since authorized shares represent the maximum possible number of shares a company can issue.

Can a Company Change Its Authorized Shares?

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• The number of shares outstanding can (and usually does) fluctuate over time.
• There’s no limit to the total number of shares that can be authorized within these documents for a large company.
• The number of shares that are available to trade is referred to as the float.
• In the above example, if the reporting periods were each half of a year, the resulting weighted average of outstanding shares would be equal to 150,000.
• This number represents all the shares that can be bought and sold by the public, as well as all the restricted shares that require special permission before being transacted.

What does EPS stand for?

Outstanding shares are one of three classifications of the share count. Issued shares refer to those shares issued by the company over time — yet, unlike outstanding shares, the number of issued shares includes shares repurchased by the company and held as treasury stock. Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well. The number of shares outstanding increases whenever a company undertakes a stock split. Stock splits are usually undertaken to bring the share price of a company within the buying range of retail investors; the increase in the number of outstanding shares also improves liquidity. A company’s outstanding shares may change over time because of several reasons.

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Sometimes the figure is expressed as an absolute figure (ex. 5 million shares) or as a percentage of the firm’s total outstanding shares. A company can increase its number of outstanding shares through stock splits. They can also reduce outstanding shares by undertaking reverse stock splits known as share consolidations. Shares that are issued or sold to investors from the available number of authorized shares are known as outstanding shares.

Thus, to raise the required funds, it’s usually necessary to offer the new shares at a notable discount to their current price. A publicly traded company’s total number of shares outstanding can usually be found on exchange platforms and in the shareholder’s equity section of the company balance sheet. The number of issued and outstanding shares, which is used to calculate market capitalization and earnings per share, are often the same. Float shares of the company are the ones that are available for trading to the public.

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Investors can use the number of outstanding shares to evaluate a company’s financial health and performance. It helps in calculating key financial ratios and understanding the company’s ownership distribution. Outstanding shares refer to the authorized shares that have been issued to a company’s shareholders, excluding the treasury stock retained by the company itself. Moreover, the number of shares outstanding formula for outstanding shares is extremely useful when monitoring how a company conducts its business, as things like stock splits also affect share numbers. A stock split occurs when a company increases the number of its outstanding shares without changing its overall market cap or value. Several factors can cause a company’s number of outstanding shares to rise or fall, with one of the most common being stock splits.

EPS Calculations

• Shares outstanding are used to determine a company’s market capitalization, i.e. the total value of a company’s equity, or equity value.
• That’s because the vast majority of its shares are available to the general investing public.
• They initially sell a set number of shares to investors, and then those same shares can be traded among investors on a secondary market.
• Companies with options, convertible bonds, etc., disclose both basic as well as diluted EPS in their financial disclosures.
• Outstanding shares, meanwhile, are the shares circulating in the market owned by investors and available for them to trade.
• A company’s outstanding shares, the total shares held by shareholders excluding treasury stock, can fluctuate due to various factors.

Issued shares are those the owners have decided to sell in exchange for cash, which may be less than the number of shares actually authorized. Earnings per share, or EPS, is a ratio that divides a company’s earnings by the number of shares outstanding to evaluate profitability and gain a pulse of the company’s financial health. First, the board of directors authorizes the company to issue a certain number of shares. The company hasn’t taken action yet; it’s just gotten approval to take action and sell some shares if it chooses to.

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• P/B is often used to value companies in the financial sector (i.e. banks) and is calculated by taking a company’s share price and dividing it by the book value per share.
• Shares outstanding include shares owned by retail and institutional investors and restricted shares held by company officials and employees.
• 11 Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
• A company’s number of outstanding shares is not static and may fluctuate wildly over time.

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• And if these instruments are in the money, they represent current ownership of the company, even if technically the shares underlying the options, warrants or debt haven’t yet been issued.
• Here, the balance sheet reports 8,019 million shares issued and 3,901 million treasury shares, as of September 30, 2022.
• To get a more accurate projection of earnings on a per share basis, both Net Income and Common Stock are often adjusted by investors.
• This includes shares distributed during the company’s initial startup phase or through secondary offerings.
• Outstanding shares impact a company’s market capitalization, which is calculated by multiplying the stock price by the number of outstanding shares.

The company does this to reduce the number of outstanding shares, hopefully leading to an increase in the market value of the remaining shares due to the lower supply and larger earnings per share ratio. As mentioned above, a company can acquire treasury shares through a share repurchase program. The company would be buying back outstanding shares to put in its treasury. The weighted average method doesn’t consider shares that can be potentially created through various mechanisms. As a result, the weighted average of outstanding shares will not tell you the diluted earnings per share. There are still some places where you can find this information, other than the SEC’s website.