Personal Finance. Your Practice. Popular Courses. What is Authorized Stock? Key Takeaways Authorized stock refers to the maximum number of shares a publicly-traded company can issue, as specified in its articles of incorporation or charter.
Those shares which have already been issued to the public, known as outstanding shares, make up some portion of a company's authorized stock. The difference between a company's authoroized shares and its outstanding shares is what the company retains in its treasury. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms Authorized Share Capital Authorized share capital is the number of stock units a company can issue as stated in its memorandum of association or articles of incorporation.
Unissued Stock Unissued stock is a term used to describe shares a company is authorized to issue but which have never been sold to investors. What Are Shares? Shares are a unit of ownership of a company that may be purchased by an investor.
What Is Capital Stock? Capital stock is the number of common and preferred shares that a company is authorized to issue, and is recorded in shareholders' equity.
Issued Shares Issued shares are the number of authorized shares sold to and held by the shareholders of a company. Some companies issue shares to raise additional capital, or to pay management, increasing shares outstanding. Others repurchase shares to reduce their shares outstanding and increase the fractional ownership of each remaining share.
In short, authorized shares are how many shares of stock a company could theoretically issue. Outstanding shares are shares over which ownership and earnings are divided, and on which dividends are paid, making a company's outstanding share count the most relevant figure for investors. This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors.
We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at knowledgecenter fool. Thanks -- and Fool on! Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Investing Best Accounts. Stock Market Basics. For example,a company might have 5 million authorized shares but only sell 3. The company can sell more shares, up the the maximum, at a secondary offering if necessary to raise cash.
Issued stock represents shares that the company has actually sold. A company can "issue" a share of stock only once. It sells the share to an investor, who can then sell it to someone else. The vast majority of transactions in a company's stock don't involve the company at all. It's just one investor selling already issued stock to another.
Companies can buy back their own shares, and these shares are known as treasury shares, reports Ready Ratios. However, when they do so, those treasury shares remain counted as "issued," because the company holds them and can resell them later on. For a small, closely held corporation, all issued shares might be in the hands of their original owners — even members of the same family, or a single individual.
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