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

Common stock outstanding is the number of shares issued minus the number of treasury stock shares outstanding as on the date of calculation, which, is usually the year end.
The figures of CSO for two years need not be
the same as fresh issue of shares for cash or
as stock dividends, purchase of treasury stock
and its sale, all could result in the ending
figure of CSO being different from the
beginning figure of CSO.
The CSO could be arrived at easily from the
balance sheet.
First look for the line item 'common stock' in
the equity section of the balance sheet. It will
give the number of shares issued. It will also
give the number of shares authorized, which,
information is not required for calculating CSO.
At the end of the equity section, the last entry
will be treasury stock outstanding and the
numbers would be shown. If it relates to
common stock it is relevant.
From the number of common stock shares
outstanding deduct the number of treasury
shares of common stock outstanding to get the
CSO.
Example:
Company A has the following equity section in the balance sheet:
Common stock, $10 par, 10000 shares authorized and 5000 shares issued	$        50,000
5% Preferred stock, $20 par, 5000 shares
authorized and issued.	$ 1,00,000
Paid in capital in excess of par:
Common stock	$        10,000
Preferred stock	$        20,000
Total paid in capital	$ 1,80,000
Retained earnings	$   2,00,000
Total capital	$    3,80,000
Less: Treasury stock: 200 common stock shares	$          3,000
Total stockholders' equity	$     3,77,000
The CSO in the above case = 5000-200 =	4800