Crash Course in Accounting and Financial Statement Analysis, Second Edition

Shares Outstanding

Shares outstanding represents the number of shares of common stock owned by all investors (shares held by the public as well as companies’ officers and employees). One share of common stock represents one unit of ownership of a public company. In other words, if you own 100 shares of a company with 1,000 shares outstanding, you own 10% of that company.

The number of shares outstanding represents capital invested by the firm’s shareholders. Shares that have been issued, but were subsequently repurchased by the company, are called treasury stock, and they are no longer outstanding (we’ll discuss why a company may choose to repurchase its shares in Chapter 6).

Owners of these shares (shareholders) are generally entitled to vote on the selection of directors and other important matters in proportion with the number of shares they own (i.e., 100 shares = 100 votes) as well as to receive dividends on their holdings.

Shares Outstanding = Shares Issued – Treasury Stock