Investment terms can be confusing. It is important to understand exactly what you are getting into when you make an investment. Many people think that shares are just shares, but there is a difference between issued and outstanding shares.
Issued Shares are the shares of stock that are sold to and held by shareholders of the company. These can be held by people within the company, investors or the general public. Issued shares also refer to the shares of stock that are available for sale. Essentially, this is stock that has been formally issued by the company to generate revenue.
Outstanding Shares are the shares of stock that are owned by people within and outside the company. They do not include shares that are retired, in treasury, or for sale. These are only shares that are currently held by a person or entity. This figure is placed on the balance sheet of the company, and is used to help calculate key metrics that help determine the risk level of the investment.
|Issued Shares||Outstanding Shares|
|Include stocks in treasury||Do not include stocks in treasury|
|Assists in determining value of stock||Assists in determining percentage owned|
|Not reported on financial documents||Reported on financial documents|
What is the difference between issued and outstanding shares? Let’s compare them by how the figures are used in calculating investment risk, and the significance this has for the stakeholders in the company.
- Issued shares include shares in the treasury that the company is holding for future sale. Issued shares in the treasury are sometimes used to barter for goods and services.
- Outstanding shares do not include shares in the treasury. Outstanding shares are only those shares that are actively owned by people within or outside the company, as well as those shares held by outside entities.
- The number of issued shares assists in determining the value of the stock, and plays a role in setting the price at market.
- The number of outstanding shares is used to determine what percentage of the company the shareholder owns, as well as how much voting power they have.
- Issued shares are not reported on financial documents. Outstanding shares are reported on the balance sheet.
Below is the video that illustrates the difference between various types of stock.