Authorized common stock refers to the total number of shares a company could issue. Typically, companies don't issue all of their authorized shares -- this gives them financial flexibility to issue new shares to raise capital, and to issue stock awards to employees.
Terms you need to know
Before we discuss how to calculate a company's percentage of authorized common stock issued, there are a few terms related to a company's number of shares that you should be familiar with:
- Authorized shares: As we already mentioned, this is the total number of shares a company could issue.
- Outstanding shares: The number of common shares that investors currently own. Don't confuse this number with issued shares, as they mean two different things.
- Treasury shares: Shares held in a company's treasury, usually as the result of share repurchases.
- Float: The number of common shares that can be traded by the public. Unlike outstanding shares, this excludes restricted shares and shares held by company officers or insiders.
- Issued shares: All of the common shares that the company has ever issued. This includes the outstanding shares, treasury shares, and any shares that have been retired.
The calculation
When preparing to calculate the percentage of a company's authorized shares that have been issued, the information you need can be found on its balance sheet. You can find the balance sheet in its annual report or in any of its quarterly reports.
Locate the stockholders' equity section, which is toward the bottom of the balance sheet. There should be a "common stock" section, which can tell you the number of issued shares as well as the number of authorized shares.
Divide the number of issued shares by the number of authorized shares, and then multiply by 100 to convert to a percentage.
Percentage issued = (Issued shares / Authorized shares) × 100
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