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Shares Authorized, Issued, and Outstanding

Brian Krogol
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So now let's learn the difference between authorized shares, issued shares and outstanding shares. So when we talk about shares of common stock, this is the ownership of the corporation. Right? Like we've talked about throughout this course, Common stock is that equity account. So there's 33 numbers that we use. When we talk about, uh, common stock first, we talk about the authorized shares. The authorized shares is the total amount of shares the corporation is allowed to sell according to its charter. So when they first created the corporation, they would have wrote something in the charter. Hey, we are allowed to sell a maximum of 20 million shares of common stock and that's the maximum and it has to be written in the, in the charter and that's gonna be the authorized shares. That has nothing to do with how many shares they've actually sold. It's just the total amount that they would ever be able to sell. Okay, so compare that to the next one issued shares. Well issued shares. This is the amount of shares the corporation has previously sold to investors. So when you sell shares to investors, well, that is when that is when you have issued shares. Okay, so authorized shares, that's the total amount that you could ever issue and then you issue shares to the investors. So when you sell them to the public, they become issued shares that are available. Finally, we have outstanding shares. Okay, so there's a small difference between issued and outstanding because outstanding shares are the amount of shares that are still in the hands of the investors. Okay, so what does this mean? How are they still in the hands of the investors? Well, that's because the corporation itself can repurchase its shares from the public and this is called Treasury Stock. So the difference between issued an outstanding is this Treasury stock and that stock that the corporation itself has repurchased from the public. Okay, so think about it. If Apple stock goes onto google and they see, oh what is this price of Apple stock, whatever the price is, let's say it's $300 a share. Well, they can go, they can go to the open market just like you or me could buy a share of Apple stock. They could repurchase their shares as well. So they could repurchase shares as Treasury stock. And we'll talk more about Treasury stock in the future. What we want to focus on here is the difference between authorized issued and outstanding shares. Okay, so what I'm gonna do is I'm gonna do this artistic rendition to kind of visualize um The difference between these three. So I never told you before, but I I've always dreamed of being a visual artist. I've wanted to paint murals on the wall, have my paintings hanging in the louver and this is gonna be one of my visual representations here. It's a bit of abstract art, but I think you'll enjoy it. So what we're gonna have is what I call the concentric circles of outstanding of of common stock That the concentric circles of common stock. So let's go ahead and do this 1st. We're gonna have this big circle here look how good I am. That's a beautiful rendition. And this is going to be our authorized stock right there. And then inside this circle look at this beautiful circle I'm gonna draw. Now this is gonna be our issued shares. And inside that circle, one more circle wow this is beautiful. This is going to be our outstanding shares. Okay so notice we authorize a total amount of shares and then we issue some of those authorized shares and then we can repurchase some of those issued shares and what's left is gonna be what's outstanding. Obviously if we haven't repurchased any shares well then the issued and the outstanding are gonna be the same because we haven't repurchased any. So the only difference there would be when we repurchased shares and then we have less outstanding shares because there's less in the hands of the public. What a beautiful drawing. Let's go ahead and do an example and learn a little bit more about authorized issued and outstanding. Cool. Let's do that in the next video