How to calculate outstanding shares
/What are Outstanding Shares?
Outstanding shares are the aggregate number of shares that a corporation has issued to investors. This is an important number, since it is used to calculate the earnings per share of a publicly-held business. It is a less-commonly used number in the financial reporting of privately-held businesses.
How to Derive Outstanding Shares
To find the total number of outstanding shares, follow these steps:
Go to the balance sheet of the company in question and look in the shareholders' equity section, which is near the bottom of the report.
Look in the line item for preferred stock. This line refers to a special class of shares that gives investors certain privileges, such as a periodic dividend. It is possible that there are no preferred shares at all. There should be a statement within the line item description stating the number of shares outstanding. Retain the number of preferred shares outstanding.
Look in the line item for common stock. This is the main class of stock that is issued to investors. There should be a statement within the line item description stating the number of shares outstanding. Retain the number of common shares outstanding.
Look in the line item for treasury stock. This line refers to shares that have been bought back from investors; if the corporation has never done so, then there will be no line item. If the line exists, there should be a statement within the line item description stating the number of shares repurchased. Retain this number.
Add together the numbers of preferred and common shares outstanding, and subtract the number of treasury shares. The result is the total number of shares outstanding.
If there is a difference between the number of shares issued and outstanding, the difference is treasury stock. In other words, a company has issued shares and then bought some of the shares back, leaving a reduced number of shares that is currently outstanding.
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How to Use Outstanding Shares Information
The outstanding shares figure is useful to know for an investor that is contemplating buying shares in a company. Dividing the number of shares to be purchased by the number of shares outstanding reveals the percentage of ownership that the investor will have in the business after the shares have been purchased.