How to Calculate Common Stock Outstanding From a Balance Sheet

Your shares need context beside a company's enterprise wide performance. Knowing common stock outstanding gives you that.

Sep 9, 2015 at 11:02PM

When you buy stock in a company, you are buying a percentage ownership in that business. How much of the business your one share buys depends on the total common stock outstanding, a figure you can easily determine using the company's balance sheet.

What common stock outstanding means, and why you should care
The common stock outstanding of a company is simply all of the shares that investors and company insiders own. This figure is important because it's used to translate a company's overall performance into per-share metrics, which can make an analysis much easier to do in terms of a stock's market price at a given time. If there are 100 shares outstanding and you buy one, you own 1% of the company's equity.

The life of common stock goes through a few phases, and understanding each step is important for putting the common-stock-outstanding number into proper perspective.

First, the board of directors authorizes the company to issue a certain number of shares. That initial figure is appropriately called "authorized" stock. The company hasn't taken action yet; it's just gotten approval to take action and sell some shares if it chooses too. As an example, let's say that a fictional business, the Helpful Fool Company, has authorized 5,000 shares.

Next, the company issues shares. This "issued" stock can be less than the total authorized, but it can never be more. The board, after all, only greenlighted the authorized amount.

At this point, the "issued" and "outstanding" stock are equal. Company management or investors own all of the issued stock. Helpful Fool Company's board has elected to issue just 2,000 shares at this time. Therefore, the company currently has authorized 5,000 shares and has 2,000 shares issued and outstanding.

Many companies elect to buy back shares as part of their capital-allocation strategy. When a company buys back its own shares, that stock is accounted for as "treasury stock" on the company's balance sheet. Treasury stock is no longer outstanding -- the company itself now owns it, not an investor or employee -- but that stock has still been issued.

Let's say that Helpful Fool Company has bought back 500 shares in this year's buyback program. The company now has 5,000 authorized shares, 2,000 issued, 500 in treasury stock, and 1,500 outstanding. The outstanding stock is equal to the issued stock minus the treasury stock.

Thanks to the SEC, common stock outstanding is very easy to calculate
All companies are required to report their common stock outstanding on their balance sheet. The easiest way to calculate the number is to simply look it up. Do that by navigating to the company's investor-relations webpage, find its financial reporting, and opening up its most recent 10-Q or 10-K filing. The same can be done on the SEC's website as well.

From there, simply scroll down until you find the section in the 10-Q or 10-K called "Capital Stock." All the details you need will be there, plain to see. You'll see the various other stock categories I've discussed, so don't let that confuse you. One possible point of confusion we haven't yet mentioned is stock given to employees as compensation, typically in some combination of restricted stock, options, or equity grants. That stock should be included in the common-stock-outstanding figure.

The calculation for common stock outstanding can seem a little daunting at first simply because there's so much accounting jargon used to define and calculate it. Don't worry -- the concept is really pretty simple. And now that you're equipped with this foundation of knowledge, all you need to do to figure it out is to go look it up on any company's balance sheet in their 10-Q or 10-K filing.

How one Seattle couple secured a $60K Social Security bonus -- and you can too
A Seattle couple recently discovered some little-known Social Security secrets that can boost many retirees’ income by as much as $60,000. They were shocked by how easy it was to actually take advantage of these loopholes. And although it may seem too good to be true, it's 100% real. In fact, one MarketWatch reporter argues that if more Americans used them, the government would have to shell out an extra $10 billion… every year! So once you learn how to take advantage of these loopholes, you could retire confidently with the peace of mind we’re all after, even if you’re woefully unprepared. Simply click here to receive your free copy of our new report that details how you can take advantage of these strategies.

This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors based in the Foolsaurus . Pop on over there to learn more about our Wiki and how you can be involved in helping the world invest, better! If you see any issues with this page, please email us . Thanks -- and Fool on!

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information