Average Shares Outstanding:
Often listed under the Stockholder's Equity section of the Balance Sheet,
Average Shares Outstanding is simply the number of shares of ownership in the
company. This figure often fluctuates from time to time as more shares
are issued by the company or shares are bought back by the company.
Importance of Average Shares Outstanding:
It is important to know the number of shares the company has issued, as the
company's ownership may become too "diluted" if they issue too many shares,
causing the stock price to stagnate even as the company does better over
time. Any increase in profits gets overshadowed by the sheer number of
shares. Companies often issue shares of stock, but a company that is
continually issuing new block of shares may mean it is in financial
desperation. The Average Shares Outstanding is used in several ratios, such
as Earnings Per Share and the Price To Earnings Ratio.
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