Explain each of the following terms: authorized capital stock, unissued capital stock, issued ca

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Explain each of the following terms: authorized capital...

Key Concepts

Treasury Stock

Treasury stock consists of shares that were previously issued and later repurchased by the company. These shares are held in the company’s treasury and are not counted in the outstanding shares. Treasury stock can be reissued or retired, and its presence affects various corporate metrics such as earnings per share and voting power.

Outstanding Capital Stock

Outstanding capital stock is the portion of the issued capital stock that is currently held by shareholders. It excludes any shares that have been repurchased by the company, as these repurchased shares are not considered to be actively part of the market and do not confer voting rights or dividend entitlements.

Authorized Capital Stock

Authorized capital stock represents the maximum number of shares a corporation is legally permitted to issue as specified in its corporate charter. It establishes the ceiling for potential equity financing and provides flexibility for future growth by allowing the company to issue more shares when needed, subject to regulatory and shareholder approval.

Unissued Capital Stock

Unissued capital stock consists of shares that have been authorized by the corporation but have not yet been issued or sold to investors. These shares remain available for future issuance and can be used to raise additional capital, compensate employees, or for other corporate purposes without needing to amend the corporate charter immediately.

Issued Capital Stock

Issued capital stock refers to the shares that have been allocated and distributed to shareholders through sale, grant, or other means. This includes all shares that have been sold to the public, investors, or company insiders, and forms the basis for calculating ownership stakes and voting power in the corporation.

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