Outstanding Shares: Formula, Calculation, Types and Importance

They allow shareholders to vote on company Bookstime decisions and collect dividends if declared but are the last to receive the assets in the event of bankruptcy. Essentially outstanding shares comprise all the shares owned by institutional investors, retail investors, and restricted shares held by insiders. Outstanding shares play a crucial role in determining a company’s market capitalization, a key metric for investors assessing a firm’s overall value.

Calculate the Weighted Average of Outstanding Shares

While total capital offers insights into financial strength, it doesn’t fully capture a company’s risk exposure, such as operational risk, market risk, or credit risk. Total capital doesn’t measure how easily a company can access cash to meet short-term obligations. A company may have balance sheet a large total capital base but could still struggle with liquidity issues if its assets are not easily converted to cash. Weighted average shares outstanding is used as a substitute for the number of outstanding shares in some equations while calculating important financial ratios. Now that we have built the foundation of outstanding shares, let’s understand the formula to calculate outstanding shares.

Stock Splits and Reverse Stock Splits: Share Count Effect

If you do not understand what are outstanding shares or how to calculate it, then this article is perfect for you. The split itself doesn’t directly affect the company’s shares outstanding formula value but can indirectly influence investor perception and stock price. If the stock becomes more appealing and demand increases due to the lower price, the market capitalization could rise as a result of the stock split.

How does Outstanding Shares determines Market Capitalization of a company?

Outstanding stocks are the shares that are actually already out on the market. The resulting number shows the total number of shares held by all market participants. It is a crucial indicator for evaluating the market capitalization of the company and the possible influence of changes in the share price on the company’s overall value. Outstanding shares are a significant aspect of calculating the market capitalization of a company. Market capitalization, or market cap, is calculated by multiplying the number of outstanding shares by the share’s current market price. The number of outstanding shares can change over time due to 6 main factors.

• Once you locate the line item for preferred stock, take note of the total number of preferred shares outstanding.
• Restricted shares are the shares owned by the company’s management or employees.
• A company generally embarks on a reverse split or share consolidation to bring its share price into the minimum range necessary to satisfy exchange listing requirements.
• You can find shares outstanding at the top of a company’s 10-Q or 10-K filing.
• If all these warrants are activated, XYZ will have to sell 100 shares from its treasury to the warrant holders.

Weighted Average of Outstanding Shares

• Now that we have built the foundation of outstanding shares, let’s understand the formula to calculate outstanding shares.
• No, working capital is a separate measure, focused on a company’s short-term assets and liabilities.
• If you are analyzing a company’s stock, it is important to take into consideration the outstanding shares.
• This can occur when a company needs to generate funds via a public offering or private placement.

Now that you have learned about one of the parameters of choosing safe stocks, open demat account with Angel One and start making your future safe. This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.

• It is a crucial indicator for evaluating the market capitalization of the company and the possible influence of changes in the share price on the company’s overall value.
• Investors and analysts use outstanding shares as important statistics to evaluate a company’s performance and value.
• As noted above, outstanding shares are used to determine very important financial metrics for public companies.
• Treasury Shares represent the company’s ownership of its stock, while outstanding shares represent the ownership interest of shareholders.
• Outstanding shares refer to the total number of company stocks currently issued and held by its stockholders.
• At any moment in time, a corporation has a specific number of shares that it has authorized for sale, to individual or institutional investors.

Outstanding shares work in the same manner that when a company decides to issue stock, it produces new shares that investors can buy and sell. These shares are sold in an initial public offering (IPO) or later secondary offers. The shares become outstanding and can be traded on the open market when sold. Issued shares is the total number of shares a company can issue in the market. Let’s examine how to do this using Apple’s 10-K filing for the fiscal year ended September 30th, 2023. The simplest way to obtain the shares outstanding is to look directly on the first page, right before the table of contents.

They also give the opportunity to the shareholders to receive dividends from the company’s profits if it decides to pay them. 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. While total capital provides insight into the financial structure, it doesn’t directly measure a company’s market value. Other metrics, such as market capitalization and earnings, are often better indicators of a company’s value. The number of outstanding shares is also connected to the stability of the company.