Definition of Common Stock Outstanding
Common stock outstanding is defined as the shares of common stock that have been issued minus any shares of common stock known as treasury stock.
The number of shares of common stock outstanding is shown in the stockholders’ equity section of the balance sheet. The weighted-average number of shares of common stock outstanding during the year is used to compute the corporation’s earnings per share often shown at the bottom of the corporation’s annual income statement.
Example of Common Stock Outstanding
Assume that a state has authorized a corporation to issue 100,000 shares of common stock. The corporation has issued 20,000 of those shares to investors and received $2,000,000. At this point, the corporation has 20,000 shares issued and outstanding. Later, one of the common stockholders sells 1,000 of its shares back to the corporation for $150,000. The corporation decides to hold the 1,000 shares “in treasury” instead of retiring the shares. As a result, the corporation will report that it has 100,000 shares authorized, 20,000 shares issued, 19,000 shares outstanding, and 1,000 shares of treasury stock.
