Let’s face it, when it comes to financial lingo many investors are confused when conversing with their advisor. If you cannot understand the lingo there is no way you will be able to implement what is suggested.
You may hear authorized and outstanding shares when listening to the news or discussing stocks. Let’s break down the terms.
Authorized shares refer to the largest number of shares that a single corporation can issue. The number of authorized shares per company is assessed at the company’s creation and can only be increased or decreased through shareholders’ vote. If at the time of incorporation the documents state that 100 shares are authorized, then only 100 shares can be issued.
Not to be confused with authorized shares, outstanding shares refer to the number of stocks that a company actually has issued. This number represents all the shares that can be bought and sold by the public, as well as all the restricted shares that require special permission before being transacted.
Because the difference between the number of authorized and outstanding shares can be so large, it’s important that you realize what they are and which figures the company is using.