Question

Explain each of the following terms: authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.

Short answer

Authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock are all components of stockholder’s equity.

Step-by-step solution

Meaning of Authorized Capital Stock

Per the company’s constitution, authorized capital refers to the maximum amount of capitala company can issue to its shareholders.

Meaning of Unissued Capital Stock

Unissued shares are shares of companies thatdon’tcirculate or don’t seem to be soldby the corporate on the market.

Meaning of Issued Capital Stock

The issued capital stock issolelythe value of the sharesthat a company offers to investors.

The number of shares issued is generally the amount of subscribed capital, although none of these amounts may exceed the authorized amount.

Meaning of Outstanding Capital Stock

The term “outstanding share capital” refers to the total shares issued under subscription contractsbinding on the subscriber.

To calculate outstanding capital stock, add both preferred and common shareoutstanding and subtract it with the number of treasury shares.

Meaning of Treasury Stock

Treasury shares, also called stock orreacquired shares, talk over with previously outstanding shares which the company repurchases.

A company can benefit from Treasury stock by including it as part of employee stock option plans.