Authorized Shares vs. Outstanding S♔hares: An Overview

Authorized shares are shares of stock that can be issued by companies to investors. Outstanding shares are shares of stock that have been is🐼sued.

In other words, authorized shares are the total number of shares that companies can legally issue or sell to investors. Outstanding shares are the total number of shares that are held by shareholders.

Authorized Shares

Authorized shares are defined as the maximum number of shares that a company is legally allowed to issue to investors, as established in its corporate organization documents, such as its articles of incorporation. Authorized shares are also referred to as authorized stock or authorized capital stock.

There's no limit to the total number of shares that can be authorized within these documents for a large company. But smaller companies that don't plan to expand or that have a set number of 澳洲幸运5官方开奖结果体彩网:shareholders are limited as to the number of authorized sha🌄r🅠es they can designate.

The articles of incorporation may authorize one share or millions of shares for a company that doesn't have an authorized shares restriction. The number of shares that are available to trade is referred to as the float.

澳洲幸运5官方开奖结果体彩网:Restricted shares also are part of a company's authorized shares. These shares are set aside for employee compensation and incentives. The total number of a company's outstanding shares as seen in the balance sheet is the sum of float and restricted shares.

Outstanding Shares

Shares that are issued or sold to investors from the available number of authorized shares are known as outstanding shares. Usually, these shares trade in the secondary market on public ex♌changes.

The number of outstanding shares is set by the investment bank that implements a company’s 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO) but the number can change.

A secondary 澳洲幸运5官方开奖结果体彩网:stock market offering can increase the number of outstanding shares, as can the payment of 澳洲幸运5官方开奖结果体彩网:employee stock options (ESOs).

Outstanding shares decrease when a company repurchases its own stock. The total number of outstanding shares can't be greater than the total number of authorized shares as laid out in a company's articles of incorporation.

Special Considerations

The number of outstanding or issued shares is always equal to or less than the total number of authorized shares. Companies often intentionally keep these two figures different so that they have the flexibility to sell more shares in the future should they have financing needs.

Companies also may hold back authorized shares as a defensive maneuver. A company can maintain a controlling interest by retaining authorized shares. It can also reduce the possi🐼bility of a hostile takeover if a majority of shares have yet to be issued.

Authorized shares that have not yet been issued may be set aside as reserved shares. Reserved shares can be used by the company as part of future stock option plans. These reserve shares may not be issued unless it's done under the stock option plan. Reserved shares can also be issued via stock warrants to a third party.

Understanding the difference between authorized and outstanding shares allows investors to make accurate calculations of financial ratios. Using outstanding shares to determine 澳洲幸运5官方开奖结果体彩网:earnings per share (EPS) could result in inflated 🌃gains. Using authorized shares may drastically offset a reꦿalized loss.

Investors should have a strong grasp of these and other underlying financial and corporate accounting terms so that they may properly size up a company’s financial stability and perforꩵmance.

Examples

Authorized Shares

Apple () was incorporated in 1997 but the company has amended its Artic🔥les of Incorporation many times since.

According to an amendment filed on Aug. 3, 2020, Apple indicated that it is "authorized to issue one class of shares." These shares fall under the category of its common stock. The total number of shares was 50.4 billion. The filing also indicated that existing shares would automatically be split into four.

Outstanding Shares

You can find the ♚total number of shares outstanding for any company in a few ways.

• Visit the company's investor relations website. For example, Microsoft (MSFT) answers a question in its FAQ section about how many shares it has outstanding. There were almost 7.5 billion shares outstanding as of July 24, 2023.
• Check financial websites or stock exchanges.
• Look at corporate documents in financial regulatory body databases such as EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system that was established by the 澳洲幸运5官方开奖结果体彩网🧸:Securities and Exchange Commission (ꦜSEC).

The Bottom Line

Understanding stock market terminology allows investors to make appropriate, intelliꦑgent, investment-related decisions.

Knowing the difference between authorized shares and outstanding shares is important for 澳洲幸运5官方开奖结果体彩网:calculating important ratios that accurately reflect the financial status and stability of a company. Companies will somet💎imes keep authorized shares in reserve so that they can sell more shares in the future when capital is needed.