Average Shares Outstanding
This is simply the number
of shares of a company that has been issued or sold in the market. This is
sometimes mentioned in the Stockholders' equity section of the company’s BalanceSheet. The number of shares outstanding varies time to time as company issues
bonus and right shares to public and also buy back some shares from the market.
Importance of Average Shares Outstanding
The number of outstanding
shares is required to identify two very important financial ratios: Earnings
Per Share and Price Earnings Ratio. Again, there should have a balance between
the performance of the company and number of shares outstanding in the market. Even
if the company does very well, selling too much shares to public may not be the
right decision. So, this is important to issue a reasonable number of shares in
the market.
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