Outstanding Shares Meaning
- 18 Oct 2024
- By: BlinkX Research Team
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Outstanding shares refer to all the shares of a company’s stock that all the shareholders currently hold. The shares included under outstanding shares are of institutional investors, company insiders, and the public. The shares that are excluded from the list of outstanding shares are the ones that the company has repurchased and they are known as treasury shares. For investors understanding the outstanding shares meaning is important to make well-informed decisions regarding the purchase or sale of a specific stock. In this article, we will explore what are outstanding shares, how to calculate outstanding shares, their different types, and a lot more.
What are the Different Types of Outstanding Shares?
The two main types of outstanding shares are Equity Shares (Common Shares) and Preference Shares. Here’s a breakdown of these two shares:
- Equity Shares (Common Shares): Equity shares also known as common shares or ordinary shares are the most common types of shares issued by a company. People with equity shares can participate in some of the company’s decisions such as in the election of the board of directors and the approval of major corporate actions. The equity shareholders are entitled to dividends, the amount depends on the company’s performance. These shareholders are paid after all the debts of the company have been settled.
- Preference Shares: Preference shares take priority over equity shares in terms of payment of dividends and the repayment of capital at the time liquidation proceeds. Preference shares give fixed dividends to their shareholders. There are no voting rights given to preference shareholders in the company.
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Table of Content
- What are the Different Types of Outstanding Shares?
- How to Find the Number of Shares Outstanding?
- How to Calculate Outstanding Shares?
- What is the Difference Between Outstanding and Authorized Shares?
- Shares Outstanding vs. Floating Shares
How to Find the Number of Shares Outstanding?
To find the number of shares outstanding you check the company’s balance sheet or the investor relations section on the company’s website. Here’s how you can find it:
- The companies that are publicly traded need to file regular reports with the Securities and Exchange Board of India (SEBI). These files contain information regarding the number of shares outstanding.
- Keep track of financial news websites that provide real-time data on a company’s outstanding shares.
- Information regarding outstanding shares is available on stock exchange websites as well.
How to Calculate Outstanding Shares?
To calculate outstanding shares you can use the outstanding shares formula which is:
Outstanding Shares=Issued Shares−Treasury Shares
In the outstanding shares formula,
Issued share is the total number of shares that a company has created and distributed to its investors whereas treasury shares are the ones that are issued by the company but later repurchased and are now under the company itself.
Here is an example for better understanding.
Suppose there is a company with 1 million issued shares. The company has repurchased 100,000 shares (treasury shares), so the outstanding shares would be:
1,000,000 − 100,000 = 900,000 outstanding shares
What is the Difference Between Outstanding and Authorized Shares?
Following are the differences between outstanding and authorized shares:
Aspect | Outstanding Shares | Authorized Shares |
| Definition | Outstanding shares are the shares that are issued and currently held by all the shareholders. This includes the public, insiders, and institutional investors. | Authorized shares refer to the maximum number of shares that an organization or company is allowed to issue to its investors. |
| Objective | The objective of outstanding shares is to show the actual shares in circulation, determining company ownership and dividend distribution. | The objective of these shares is to set a legal limit on the number of shares to control potential dilution and maintain shareholder value. |
| Issued or Not | Yes, they are issued and actively held by investors. | No, they are not issued; they represent the potential total shares. |
| Voting Rights | The holders of outstanding shares have voting rights. | The holders of authorized shares do not have voting rights until the shares are issued. |
Shares Outstanding vs. Floating Shares
The following are the differences between Shares Outstanding and Floating Shares:
Aspect | Outstanding Shares | Floating Shares |
Definition | Outstanding shares meaning is the total number of shares currently held by all the shareholders. | Floating shares are several shares that are available for trading in the open market. |
Aim | Outstanding share aims to represent the total number of shares currently held by all shareholders, which is essential for calculating market capitalization. | The float is important for understanding the liquidity of a stock. |
Liquidity | Does not specifically measure liquidity. | Directly reflects market liquidity and trading volume. |
Impact on Market | Affects calculations of market capitalization and Earnings Per Share (EPS). | Affects stock liquidity and price volatility. |
Ownership | Represents the total distribution of ownership among all shareholders. | Represents shares available for public trading, excluding restricted shares. |
Conclusion
To understand a company’s market value and investment potential it is important to gain knowledge about what outstanding shares are. Outstanding shares represent all the shares held by investors, excluding those repurchased by the company. They are crucial for calculating market capitalization, EPS, and dividends. For real-time data on outstanding and floating shares, consider using a share market app. These apps provide up-to-date information and analytics, helping investors make informed decisions efficiently.
