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June 02, 2022

How to Сalculate Shares Outstanding in Accounting?

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Shares Outstanding (SO) are held by the company’s shareholders at a given time after excluding ones repurchased by the company and are shown as equity part in the company’s balance sheet liabilities.

The company also frequently holds SO portion in its treasury, both from initial share issues and share buybacks. They are called “treasury shares” and are not included in the balance sheet.

Shares Outstanding Formula

The SO number is equal to the number of the issued minus the number held in the company’s treasury. The formula looks like this:

SO = Issued – Treasury

The total number of issued and treasury shares includes both common and preferred shares held on the company’s balance sheet.

It is also equal to the shares outstanding number (public and restricted shares or tose held by company officials) and all restricted shares.

If a company issues a total of 1,000 shares. 600 (six hundred) are issued to the general public, 200 (two hundred) are given as restricted shares to company insiders, and 200 (two hundred) to the company’s treasury holds. The company has 800 outstanding and 200 (two hundred) treasury shares in this case.

Shares Outstanding Understanding

Any authorized shares held or sold by corporation shareholders or treasuries held by the company itself are shares outstanding numbers. The SO number in the open market, including those held by institutional investors and owned by company insiders and officers.

A company’s outstanding shares can fluctuate for many reasons. They will increase if the company issues additional shares. The SO number will decrease if the company buys back its shares under the buyback program.

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Shares Outstanding Types

There are two types:

  • Basic;
  • Diluted.

The underlying shares refer to the number of the SO, while the fully diluted number considers warrants, capital notes, and convertible ones. The fully diluted SO number tells you how many shares can potentially be issued.

Warrants give the holder the right to purchase more issued shares from the company’s treasury. The outstanding stock increases whenever warrants are activated, and the number of treasury shares decreases. For example, suppose ABC issues 100 warrants. ABC will have to sell 100 shares from its treasury to warrant holders if all these warrants are started.

How to Сalculate Shares Outstanding in Accounting?

Shares Outstanding Calculation

To find the total SO number, follow these steps:

  • Go to the company’s balance sheet in question and look at the shareholder equity section at the bottom of the report.
  • Maintain the preferred SO number. Find preferred ones in the line. This line refers to a particular class that benefits investors, such as a periodic dividend. The position description must contain a statement indicating the SO number.
  • Find common stock in the line. This is the main class that is issued to investors. The position description must contain a statement indicating the SO number. Maintain the ordinary shares’ outstanding number.
  • Find treasury stocks in the line. This line refers to shares repurchased from investors; there will be no line if the corporation has never done this. If the line exists, the position description must indicate the number of redeemed shares. Save this number.
  • Sum the number of preferred and common SO and subtract the treasury shares. The result is the total SO number.

Shares Outstanding Weighted Average

Because the SO number is included in the main financial metrics calculations, such as earnings per share, this number is subject to change over time. Some formulas often use the weighted average shares outstanding number instead.

A company with 100,000 SO decides to have a stock split, thus increasing the total number to 200,000. The company later reports a profit of $200,000. The formula for calculating earnings per share for the entire time would be as follows:

(Net income – Dividends on preferred shares (200,000)) / SO (100,000 – 200,000)

It remains unclear which option of SO value to include in the equation: 100,000 or 200,000. In the first case, earnings per share will be $ 1, and $ 2 per share in the second. Financial calculations can use the weighted average number which is calculated as follows:

(SO x Reporting Period A) + (SO x Reporting Period B)

In the example above, if the reporting periods were every half year, the resulting weighted average number would be 150,000. So when EPS is recalculated, $200,000 divided by 150,000 weighted average SO would be $1.33 earnings per share.

Shares Outstanding and Floating Shares

The shares’ outstanding number is determined by subtracting their number minus the shares held privately — the large number of shares held by a single party, whether an individual or a controlling shareholders group such as officers or company directors.

Floating shares represent a company’s active shares or turnover among various investors in the market, except for parties holding a significant capital share.

Difference Between Shares Outstanding and Floating Shares

While SO refer to company shares, including restricted and institutional, floating shares refer to those available for trading. Floating shares are calculated by subtracting outstanding and restricted ones. Restricted shares are held by company insiders, employees, and key shareholders that are subject to time restrictions and therefore cannot be traded.

Find the Shares Outstanding Number

There are several useful public information sources to find the total SO number. They include:

  • Investor Relations web page (applies to public companies only)
  • Authorized Information Service (databases provided by local financial authorities such as the US Securities and Exchange Commission or US EDGAR)
  • Exchanges (on their websites)

Investors can look at the equity section of the company’s balance sheet. The share capital section shows the sum of the total authorized shares number, and the total shares outstanding number.

The total SO can be easily calculated as the company’s market capitalization divided by the current share price.


Shares outstanding are held by shareholders, company officials, and public investors, including retail investors, institutional investors, and insiders. However, outstanding holdings do not include treasury shares.

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Author: Charles Lutwidge

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