Common Stock Defintion

Common Stock Formula

The common stock formula is represented as follows,

Common Stock (Outstanding Shares) = Number of Issued Shares – Treasury Stocks

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  • Outstanding shares – Outstanding shares are the number of shares available to the company owners who hold a portion of the business. These holders can be company insiders or outside shareholders.Treasury Shares – Treasury Shares the shares bought back by the company. Issued Shares – Issued shares are the total number of shares issued by the company out of the overall pool of authorized shares.

Examples of Common Stock

Let’s see some simple to advanced examples of the Common Stock calculation to understand it better.

Example #1

Let us take an arbitrary example of company A to find out how to calculate the number of outstanding shares of the company. We will also try to understand what authorized shares, issued shares, and treasury stocks mean. For example, suppose the number of authorized shares for a company is 5000 shares.

Suppose the treasury stock portion is 500 shares. Authorized share is the maximum number of shares a common issue mandated during a company’s public offering.

The snapshot below represents all the data required for common stock formula calculation.

Calculation of outstanding shares will be as follows,

Number of outstanding shares= 2000-500= 1500.

Therefore, the number of outstanding shares will be – 

A number of outstanding shares = 1500.

A companA company cannot issue shares more than the authorized number of shares, but it can issue less than the number of authorized shares. So suppose the company has issued 2000 shares during a public offering. So, in this case, the number of shares issued is equal to the company’s outstanding shares. Companies sometimes buy back sharesBuy Back SharesShare buyback refers to the repurchase of the company’s own outstanding shares from the open market using the accumulated funds of the company to decrease the outstanding shares in the company’s balance sheet. This is done either to increase the value of the existing shares or to prevent various shareholders from controlling the company.read more, which is part of their corporate strategy. If the company buys back its shares, that portion of the share is with the company, and the equity owners do not own that share.

Example #2

Let us look at the common of a company from its quarterly filing. The company AK Steel is a US stock in the steel industry. Below is the snapshot of the shareholder’s equity section for the company AK Steel. The company reports in its quarterly filling the information for its common stocks.

The information includes the number of authorized shares and the maximum amount of shares the company can issue.

Therefore, the calculation of the number of outstanding shares will be as follows,

Number of outstanding shares= 316,569,578 – 1,059,088

The number of outstanding shares will be – 

Number of outstanding shares =315,510,490

The number of authorized shares for AK Steel is 450,000,000 shares. The company issued fewer shares than it was authorized to issue, which is 316,569,578 shares. The number of treasury shares for the company, which is the number of shares bought back by the company that is no longer part of outstanding shares and do not receive any dividend, is 1,059,088.

Example #3

Let us look at the common of a company from its quarterly filing. The company United Steel is a US stock in the steel industry.

Below is the snapshot of the shareholder’s equity section for the company AK Steel. The company reports in its quarterly filling the information for its common stocks.

Number of outstanding shares= 177,354,654 – 96,399

Number of outstanding shares = 177,258,255

The information includes the number of authorized shares and the maximum amount of shares the company can issue. The number of authorized shares for AK Steel is 300,200,000 shares. The company issued fewer shares than it was authorized to issue, 177,354,654 shares.

The number of treasury shares for the company, which is the number of shares repurchased by the company, is no longer part of outstanding shares and does not receive any dividend, is 96,399.

Video

This has been a guide to Common Stock Formula. Here we discuss how to calculate Common Stock (number of outstanding shares) with practical examples and a downloadable excel sheet. You can learn more about accounting from the following articles –

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