Question

I am not sure how to compute commom stock outstanding.

What if a firm has had certain amount of CSO in year 1, and different amount in year 2. Are they the same? Could you please provode an example with explanation? Thank you,

Answer 1

The common stock outstanding of a company is simply all of the shares that investors and company insiders own.

Firstly, the board of directors authorizes the company to issue a certain number of shares. That initial figure is appropriately called authorized stock.

Secondly, the company issues shares. This "issued" stock can be less than the total authorized, but it can never be more.Those issued shares are called common stock outstanding.

How ever Many companies decide to buy back shares as part of their strategy. When a company buys back its own shares, that stocks are accounted for as "treasury stock" on the company's balance sheet. Treasury stock is no longer outstanding, the company itself now owns it.

That is when a company having treasury stock then CSO= No. of Total Shares issued - No. Shares in Treasury Stock

If a firm had different amount of CSO between two years it means there is an increase or decrease in share capital.

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CSO can be simply calculate by dividing Total Amount under share capital by paid up value of each share.

For Example

A company has following balances

Authorized Capital ($10 each)	50000 Shares
Issued Capital
Fully paid up (ie. $10 each)	$              2,00,000
Partly paid up ($5 paid up)	$              1,00,000
Total	$              3,00,000

Here CSO = ($200000/$10) + ($100000/$5)= 40000

If the company called balance $5 for 20000 shares then the total amount would be $400000, but the CSO does not change.

When the company issues remaining 10000 stocks then there is a change in amount of total share capital but this case CSO would also change. New CSO would be 40000+10000 = 50000

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Hope you Understood.
If you have any doubt please leave a comment.

Thank you.