Account and Finance Class Help?

Question

The balance sheet caption for common stock is:

Common stock, $10 par value, 7,000,000 shares authorized, 5,700,000 shares issued, 5,500,000 shares outstanding.

(1) Calculate the dollar amount that will be presented opposite of this caption.

(2) Calculate the total amount of a cash dividend of $1.00 per share.

(3) What accounts for the difference between issued shares and outstanding shares?

Answer 1

Outstanding Shares - Stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public. Shares that have been repurchased by the company are not considered outstanding stock. This number is shown on a company's balance sheet under the heading "Capital Stock" and is more important than the authorized shares or float. It is used to calculate many metrics, including market capitalization and earnings per share (EPS).

Issued Shares - The number of authorized shares that is sold to and held by the shareholders of a company, regardless of whether they are insiders, institutional investors or the general public. Also known as "issued stock". Issued shares include the stock that a company sells publicly in order to generate capital and the stock given to insiders as part of their compensation packages. Unlike shares that are held as treasury stock, shares that have been retired are not included in this figure. The amount of issued shares can be all or part of the total amount of authorized shares of a corporation.

The total number of issued shares outstanding in a company is most often shown in the annual report.

(1) Calculate the dollar amount that will be presented opposite of this caption
Common stock : $55,000,000

(2) Calculate the total amount of a cash dividend of $1.00 per share.
Dividends are only given on outstanding shares. Therefore the total amt of a cash dividend of $1 per share = $5,500,000

(3) What accounts for the difference between issued shares and outstanding shares?
This could be due to a Share Repurchase - A program by which a company buys back its own shares from the marketplace, thereby reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued.

Answer 2

3) Could be Treasury Stock, which are shares the company holds for a variety of reasons. For example, the company has issued 5.7 Million shares, but has bought 200,000 shares on the open market. These shares that the company holds of their own stock are referred to as Treasury Stock.

Answer 3

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