Three common terms you will see on financial statements are:
Shares authorized, shares issued and shares outstanding.
Shares authorized- the number of shares a company is able to issue outlined in its bylaws. A vote usually needs to take place in order to increase this number. Companies rarely issue the number of shares they are authorized. Most authorize 100 million when they begin.
Shares issued- the number of shares a company has issued out of what they are able to issue (shares authorized). This is essentially how many shares the company at one time sold to the public, management or insiders (more than 5% ownership in the company).
Shares outstanding- the number of shares that are currently outstanding to shareholders (management, private, insiders or institutional investors). Most companies also require a vote to increase this number. For example a vote to offer a 1 share dividend for every 1 share of stock outstanding (aka 2 for 1 split)
The reason the shares outstanding and shares issued sometimes differ is because a company can hold what is called treasury stock. Treasury stock is stock the company has previously issued and has been previously outstanding, but the company has since purchased back from the market and they hold for purposes of options and incentives for employees mainly.
Float- the float is the number of outstanding shares not held by insiders or management. Essentially the number of shares freely tradable on a daily basis without filing a Form 144 to do so.
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Here is an example from MSFT's most recent balance sheet:
Common stock and paid-in capital--shares authorized 8,000;
shares issued and outstanding 2,408 and 2,470
These numbers are in millions so it is 8 billion shares authorized, 2.408 billion shares issued and 2.470 billion outstanding
They probably started with 100 million authorized and now it is 8 billion after all the splits.
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Here is IBM's most recent balance sheet showing Treasury Stock also: (Ignore the preferred stock, that isn't part of this explanation)
Stockholders' equity:
Preferred stock - par value $.01 per share
Shares authorized: 150,000,000
Shares issued: 1998 - 2,597,261
1997 - 2,597,261
Common stock - par value $.50 per share
Shares authorized: 1,875,000,000
Shares issued: 1998 - 976,994,457
1997 - 969,015,351
Treasury stock - at cost
Shares: 1998 - 33,931,487
1997 - 923,955
Employee benefits trust - at cost
Shares: 1998 - 10,000,000
1997 - 10,000,000
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I am not sure if these definitions are very clear. I don't think I presented them in the most understandable manner. Hopefully these examples help you understand them. If you have any additional questions about this feel free to ask and I will do my best to help you understand.
All the best...
Gambler |
