What Are Outstanding Shares?

If a company considers its stock to be undervalued, it has the option to institute a repurchase program. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float. A company may have 100 million shares outstanding, but if 95 million of these shares are held by insiders and institutions, the float of only five million may constrain the stock’s liquidity. The calculation for common stock outstanding can seem a little daunting https://www.facebook.com/BooksTimeInc/ at first simply because so much accounting jargon is used to define and calculate it.

Weighted Average Shares Outstanding

In effect, it weights any change in the number of shares outstanding according to the length of time that change was in effect. So far, we’ve focused on shares outstanding, whether basic or diluted, at a fixed point in time. In SEC filings, companies will report the total number of shares outstanding on a given day, but in their quarterly and annual figures they must also offer the weighted average shares outstanding. But the concept of outstanding shares is a bit more complicated than it seems. https://www.bookstime.com/articles/do-i-need-a-personal-accountant The number of shares outstanding changes over time, sometimes dramatically, which can impact the calculation for a reporting period. At any given point, instruments like warrants and stock options must be accounted for as well.

• In general, stocks with low floats will experience more volatility than those with large floats.
• Investors calculate the cost basis to determine if their investment has been profitable or not, along with any possible taxes they might owe on the investment.
• While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float.
• As a real-world example, here is some information from Johnson & Johnson’s 2014 year-end balance sheet.
• The term shares outstanding is defined as the total number of shares a company has issued to date, after subtracting the number of shares repurchased.
• If that event occurs on, say, December 15th of the year, it can distort the company’s apparent number of shares outstanding for the year.

How to Calculate Common Stock Outstanding From a Balance Sheet

Total shares outstanding decreased from more than 21 billion in 2016 to less than 17 billion in 2020. The tech company spent billions buying back its stock during these years. The number of outstanding shares can be found on a company’s most recent quarterly or annual filing with the Securities and Exchange Commission (SEC), usually on its balance sheet in the shareholders’ equity section. Here’s what you need to know about the different share counts that publicly traded companies use, as well as how you can calculate the number of outstanding common shares.

• When you look a little closer at the quotes for a company’s stock, there may be some obscure terms you’ve never encountered.
• 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.
• It’s worth noting that a company’s basic number of shares outstanding can differ from its fully diluted number of shares.
• The life of common stock goes through a few phases, and understanding each step is important for putting the common-stock-outstanding number into proper perspective.
• This potentially large range is the reason why a weighted average is used, as it ensures that financial calculations will be as accurate as possible in the event that the amount of a company’s shares changes over time.

Outstanding vs. issued vs. float

Increasing treasury shares will always result in decreases and vice-versa. A company’s number of shares outstanding is used to calculate many widely used financial metrics. Market capitalization — share price times number of shares outstanding — and EPS are both computed using shares outstanding formula a company’s number of outstanding shares. The number of shares outstanding for a company is equal to the number of shares issued minus the number of shares held in the company’s treasury. If a company buys back its own stock, those repurchased shares are called treasury stock.

Outstanding Shares and Share Repurchase Programs

• Shares outstanding adjusts with corporate events like stock issuances or buybacks.
• The weighted average shares outstanding figure smooths out this variance, by simply averaging the share count across the reporting period.
• But the supply of shares in the market can have a bearing on trading dynamics.
• While outstanding shares determine a stock’s liquidity, the share float—shares available for public trading – plays a crucial role.

In addition to the stocks they issue to investors and executives, many companies offer stock options and warrants. These are instruments that give the holder a right to purchase more stock from the company’s treasury. Every time one of these instruments is activated, the float and shares outstanding increase while the number of treasury stocks decreases.

• Outstanding shares impact a company’s market capitalization, which is calculated by multiplying the stock price by the number of outstanding shares.
• The calculation for common stock outstanding can seem a little daunting at first simply because so much accounting jargon is used to define and calculate it.
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• At any given point, instruments like warrants and stock options must be accounted for as well.