Market Value of Equity: Definition and How to Calculate

Outstanding shares are the total number of shares issued by the company except the ones held in the company treasury. It includes all the shares held by public, institutional investors and company insiders and are used to determine the market capitalisation of the company. The formula for determining the outstanding shares is the number of shares outstanding x current share price. The term outstanding shares refers to a company’s stock currently held by all its shareholders.

Shares Outstanding in Financial Metrics

The float is the portion of outstanding shares that’s most relevant for smaller investors. Other companies may explicitly list their outstanding shares as a line item in the equity section of their balance sheet. In the end, as the number of outstanding shares decreases by 1,000, the company’s EPS increases by 6.89%. Floating shares serve as a good representation of the company’s active shares or share turnover among various investors in the market, excluding parties holding substantial portions of equity. Authorized shares are those a company’s founders or board of directors (BofD) have approved in their corporate filing paperwork. 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.

• And when shares are bought back, investors end up owning more of the company.
• As a trader, you can use these insights to improve your trading performance and profitability.
• Market capitalization — share price times number of shares outstanding — and EPS are both computed using a company’s number of outstanding shares.
• A company may announce a stock split to increase the affordability of its shares and grow the number of investors.
• The buyback increases the market value of the existing shares in the open market.

What Is the Difference Between Authorized Shares and Issued Shares?

The company now has 5,000 authorized shares, 2,000 issued, 500 in treasury stock, and 1,500 outstanding. The outstanding stock is equal to the issued stock minus the treasury stock. The number of shares outstanding can be computed as either basic or fully diluted.

How to Calculate Preferred Stock Outstanding

• If there is a difference between the number of shares issued and outstanding, the difference is treasury stock.
• Floating stock is calculated by taking outstanding shares and subtracting restricted shares.
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• For instance, stock buybacks may increase the value of the remaining shares of stock and improve metrics such as earnings per share because there are fewer shares outstanding.
• A company’s number of outstanding shares is not static and may fluctuate wildly over time.
• It is worth noting that some companies may choose to list the number of common stock or shares outstanding.
• The category does not include treasury stock, which is the company’s own stock held by the company.

How much of the business your one share buys depends on the total common stock outstanding, a figure you can easily determine using the company’s balance sheet. Outstanding shares differ from treasury shares, which are the shares held by the company itself and how to find number of shares outstanding on balance sheet which cannot be sold in the open market. Treasury shares plus outstanding shares together form the total number of issued shares. The number of shares outstanding increases when a company issues additional shares or when employees exercise stock options.

How to Calculate the Common Stock Outstanding From a Balance Sheet

Companies do this to increase their earnings per share, as the same amount of earnings is spread out over a smaller number of shares, resulting in earnings-per-share “growth.” The shareholders’ equity section of a company’s balance sheet notes its total number of shares. Issued shares is the total number of shares a company can issue in the market. Outstanding shares are often confused with float and market capitalisation. To understand the differences between outstanding shares and float, we first need to understand the types of shares.

Common stock outstanding refers to the sum of all shares that a company’s insiders and its investors own. Another place to get information on issued shares is the balance sheet. In particular, when a company issues stock that has a par value, the balance sheet will typically have numbers you can use to calculate issued shares. Below is some information about shares-related transactions of a company. We have been asked to show how the following transactions will impact the company’s balance sheet and calculate the number of shares outstanding. You can find outstanding shares in the company’s most recent annual report found on Form 10-K or on quarterly 10-Q filings.

• It includes the shares owned by company management, shareholders and institutional investors such as hedge funds.
• After that, investors may sell it to another investor on the secondary market.
• Think of authorized stock as the absolute maximum number of shares that can be available on the market for trading.
• While the lower number of outstanding shares often hampers liquidity, it could also deter short sellers since it becomes more difficult to borrow shares for short sales.
• Form 10-K can be found along with other SEC required forms and investor information on company websites, generally within an “investors” or “investor relations” section.

The image below shows a section of Apple’s (AAPL -0.97%) balance sheet from 2016 through 2020. The second line from the bottom indicates the number of shares outstanding at the end of each fiscal year, and the bottom line indicates how many new shares were issued by Apple in that year. 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. As a potential investor, it is important to understand the meaning and functionality of outstanding shares as they can affect various financial parameters and also show the company’s liquidity.

Understanding outstanding shares

However, there are cases, particularly with larger companies, where not all the shares issued will be in the hands of investors. For example, when a company repurchases its shares, they are no longer held publicly but kept in the company’s treasury instead. These shares would then count as issued shares but not as outstanding shares. Alternatively, outstanding shares are issued shares minus any shares in the treasury.