Definition
Issued shares refer to the number of shares a corporation has legally distributed to investors. These can include both common and preferred shares that a company has sold (both to the public and privately) but does not necessarily include shares that are repurchased as treasury shares. It’s a key component in calculations of market capitalization and earnings per share.
Phonetic
The phonetic pronunciation for “Issued Shares” is: “ih-shood shairs”
Key Takeaways
<ol> <li>Issued Shares Definition: Issued shares are the authorized shares that are sold and held by shareholders. These shares represent ownership in a corporation and can be common shares or preferred shares. They have the right to receive dividends and vote in the corporation’s decisions.</li> <li>Issued Shares vs Authorised Shares: Born out of authorized shares, issued shares are those that are allocated to and held by the shareholders, while authorized shares are the maximum number of shares that a corporation can issue as set in its corporate charter. The number of issued shares can be less or equal to the number of authorized shares, but it cannot exceed it.</li> <li>Issued Shares and Stockholder Equity: The number of issued shares is significant in determining stockholder equity, along with retained earnings and additional paid-in capital. Stockholder’s equity is computed by subtracting total liabilities from total assets of the company, and part of it is derived from the issued shares of stock.</li></ol>
Importance
Issued shares are crucial in the world of business and finance because they represent the actual number of shares a company has sold and dispersed to investors. This number is significant as it’s one of the key components in calculating important financial ratios like earnings per share (EPS) and cash flow per share. They can also aid in determining a company’s market capitalization. Additionally, by comparing the number of issued shares to authorized shares, investors and analysts can gain insights into a company’s future fundraising prospects. Therefore, the concept of issued shares is central to understanding a firm’s financial health, market value, and potential for growth.
Explanation
Issued shares are an important cornerstone in the capital structure of a corporation as they are used as a way for the corporation to raise capital. When a company decides to raise money, it does so by selling parts of its ownership in the form of shares. These shares are “issued” to investors who choose to buy them. The capital raised can then be used by the company for various purposes, like starting new projects, paying off debt, or reinvesting in the business. Having more shares issued can help a company fund its short or long-term needs without taking on additional debt, hence preserving the company’s balance sheet. On the investor side, these issued shares signify a portion of ownership in the company. People who buy issued shares are purchasing a piece of the company, making them shareholders with certain rights, such as the right to vote on company policy and receive a portion of the company’s profits in the form of dividends. Therefore, issued shares can serve the dual purpose of raising capital for the company and providing an investment opportunity for people interested in sharing in the company’s potential future profits.
Examples
1. Apple Inc.: As of 2021, Apple Inc. has approximately 16.69 billion issued shares. These shares represent the total amount the company has released for purchase by the public. The company utilizes funds from these issued shares for various corporate activities. Over time, the total number of issued shares may change due to stock splits or other corporate actions.2. Amazon.com Inc.: As a global E-commerce giant, Amazon has issued shares to fuel its growth and expansion. As of 2021, the company has approximately 504 million issued shares. These shares are traded publicly on NASDAQ. The proceeds from these issued shares have helped Amazon grow from an online bookstore to a multinational tech company.3. Tesla, Inc.: Tesla, led by Elon Musk, has also issued shares as a strategy to raise capital. With approximately 963 million issued shares as of 2021, Tesla has funded research and development, production, and expansion of their electric vehicles and renewable energy products. The issuance of shares also allowed for the company’s inclusion in the S&P 500, signaling its growth and market influence.
Frequently Asked Questions(FAQ)
What are Issued Shares?
Issued shares refer to the portion of a company’s shares that have been authorized, issued and purchased by investors. These shares represent the ownership of the company and could be available for the public or kept as treasury shares.
How do issued shares differ from authorized shares?
Authorized shares refer to the maximum number of shares that a company is allowed to issue, as stated in the company’s articles of incorporation. On the other hand, issued shares are those that have actually been issued and are held by investors. Not all authorized shares are necessarily issued.
What is the significance of issued shares?
Issued shares are important as they represent the extent of the company’s ownership that has been distributed among investors. It tells about the distribution of equity in a business and potentially affects control and dividend distribution.
Can the number of issued shares change over time?
Yes. A company can issue more of its authorized shares at any time, given it abides by regulation and its shareholders approve the action. This can be done to raise additional capital. Alternatively, a company can also buy back its issued shares, reducing the number in circulation.
How are issued shares recorded on a company’s balance sheet?
Issued shares are recorded in the shareholder’s equity section of a company’s balance sheet. They are typically listed at their par value, with any amount received above this value recorded as additional paid-in capital.
Are issued shares an indicator of a company’s value?
Yes and no. While the number of issued shares can give insight into the spread of a company’s ownership, it does not directly reflect its overall market value. The value of the company is more accurately reflected by the company’s market capitalization, which is calculated by multiplying the current stock price by the total number of issued shares.
Can issued shares be unissued?
Yes. Shares can be unissued if a company decides to buy them back. They become treasury shares and the company can decide to reissue them in the future.
Related Finance Terms
- Authorized Capital
- Share Capital
- Outstanding Shares
- Common Stock
- Dividend
Sources for More Information
