How to Calculate Outstanding Shares

These are called “treasury shares” and are not included in the balance. Increasing treasury shares will always result in decreases and vice-versa. A company thus resorts to a weighted average shares calculation to accurately determine its earnings. It utilises this calculation to arrive at a total of outstanding shares not only at the end of a period but also throughout such duration. For example, let’s say you want to calculate the weighted average number of outstanding shares for a company over two reporting periods of 6 months each.

• A reverse stock split exchanges existing shares for a proportionately smaller number of new shares.
• It helps in calculating key financial ratios and understanding the company’s ownership distribution.
• Evaluating the trend of this number provides useful insights to investors.
• Jeff Williams is a full-time day trader with over 15 years experience.
• Outstanding shares include share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Basic EPS vs. Diluted EPS: What is the Difference?

Typically, a stock split occurs when a company is aiming to reduce the price of its shares. When this takes place, a company’s outstanding shares increase, and a higher degree of liquidity results. By contrast, a reverse stock split occurs when a company seeks to elevate its share price. Often, a company does this to meet listing requirements, which often require a minimum share price.

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But the company, as in our example above and using the treasury stock method, has 5 million shares linked to options and warrants. Let’s assume the company also has $500 million in convertible debt with a conversion price of $5. Warrants are instruments that give the holder a right to purchase more outstanding stock from the company’s treasury. Grocery Store Accounting Whenever warrants are activated, stocks outstanding increase while the number of treasury stocks decreases.

Weighted average shares outstanding-

The number of shares repurchased is calculated by taking the strike price multiplied by the new shares—divided by the market share price. The treasury stock method (TSM) requires the market share price, which we’ll assume is $40.00 as of the latest market closing date. The number of common shares outstanding outstanding shares formula at the beginning of the period was 160 million. The earnings per share (EPS) reported by a company per GAAP accounting standards can be found near the bottom of a company’s income statement, right below net income.

How to Calculate the Number of Shares of Common Stock Outstanding

If you’re a market beginner, learning the ins and outs of stocks will help you get started trading, and making money. Read on to learn how to calculate outstanding shares so you can begin mastering the market. The net dilution comes out to be accounting 30 million shares, which we’ll add to the weighted average shares outstanding of 150 million. The difference between the basic earnings per share and diluted earnings per share is that the latter adjusts for the net impact from potentially dilutive securities.