Credit: Source: .Shares outstanding refers to the number of shares of common stock that investors currently own and are used to calculate many common financial metrics, such as earnings per share and market capitalization. The number of outstanding shares can be found on a company's most recent 10-Q or 10-K, or on its balance sheet in the shareholders' equity section, but to fully understand where this number comes from and why it's useful, you should also know several other ways to describe how many shares a company has.
Many different share counts
To understand where shares outstanding comes from, there are a few other terms you should be aware of.
- Authorized shares: the total number of shares a company could issue.
- Issued shares: how many shares have ever actually been traded. This includes any shares that the company has bought back and now holds in its treasury (that is, treasury shares).
- Float: the number of shares available to be traded by the public. Excludes any restricted shares, or shares held by company officers or insiders.
What you need to know about shares outstanding
In those terms, the number of shares outstanding is equal to the number of issued shares minus the number of shares held in the company's treasury. It's also equal to the float plus any restricted shares.
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Source: TD Ameritrade .
Why it's useful
The number of shares outstanding can be useful for calculating many widely used financial metrics. For example, a company's market capitalization and EPS are both calculated based on the number of outstanding shares.
It's also worth noting that there are two ways to express the number of shares outstanding: basic and fully diluted. The basic number refers to the current number of outstanding shares, while the fully diluted number takes into account such things as warrants, capital notes, and convertible stock. In other words, the fully diluted number of shares outstanding tells you how many outstanding shares there could potentially be.
To sum it up, a company's number of shares outstanding is the number of shares investors own. That makes it the most useful share count for calculating financial metrics, as well as for determining dividend payments.
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