Calculating OUTSTANDING Shares

Trading in share need knowledge of types of shares company has offered. Proportion or part of shares held by shareholders are called outstanding shares. It shows that which investor has higher number shares and has influence at shareholder meetings. This number is also used to calculate many key financial metrics.

Outstanding shares = Common Stock outstanding + Preferred stock – Treasury shares

Treasury Stock

These are shares that were once owned by investors that a corporation has repurchased. They do not include preferred shares. These are the portion of shares that a company keeps in its treasury.

Preferred Shares

These are stocks that do not carry shareholder voting rights but do give their owners some ownership rights and pay a fixed dividend.  It is generally considered a hybrid instrument, including properties of both a debt and equity instrument. Preferred stocks are higher ranking than common stock, but also subordinate to bonds in terms of claim, or rights to their share of the company’s assets.

Authorized Shares

The number of shares that a corporation is legally allowed to issue. Outstanding shares are different than authorized shares. Outstanding stocks are the shares that are actually already out on the market.

Common Stock

It is a security that represents ownership in a corporation. Investors who hold common stock exercise control by being able to vote on corporate policy and electing the company’s board of directors.

Calculating Outstanding Shares

Check Balance Sheet shareholders’ equity section.

Weighted Average of Outstanding Shares

The number of outstanding shares in a company can fluctuate over time, sometimes dramatically. A company could issue new shares, repurchase existing shares, or convert employee stock options into shares.

The weighted average incorporates changes in the number of outstanding shares over a certain period of time.

For Example,

In the first 6-month reporting period, the company has 100,000 shares outstanding. In the second 6-month period, the company’s number of shares outstanding is 150,000.

 

Weighted Average of Outstanding Shares = (Shares outstanding * proportion of period A) + (shares outstanding * proportion of period B)

 

During the first period,

the company’s weighted shares outstanding = 100,000 * 0.5 = 50,000.

 

In the second period,

the company’s weighted shares outstanding = 150,000 * 0.5 = 75,000.

 

Finally,

Outstanding shares = 50,000 + 75,000 = 125,000.