Understanding Stock Share Terms
Not all shares of stock are created equally. Authorized, restricted, float, outstanding and unissued shares all have different attributes. Investors need to know these terms to make informed decisions. You will hear these terms and see some of them used in financial ratios, so it is important to understand how these types of shares differ. First, let s define the terms, and then I ll explain why it is important to understand the difference. • Authorized Shares These shares represent the total number of shares of stock authorized when the company was created. Only a vote by the shareholders can increase this number of shares. However, just because a company authorized a certain number of shares doesn t mean it must issue all of them to the public. Most companies retain shares for use later called unissued stock or shares. • Unissued Shares Shares a company retains in its treasury and not issued to the public or to employees are unissued shares.
