How to Calculate Shares Outstanding From Financial Statements

If a company floats its shares on a public stock exchange, it is required by law to release an income statement to the public on a quarterly basis. From the income statement, you can easily obtain the information needed to calculate the average number of shares outstanding for a given quarter. Although the calculation is relatively simple, the procedure differs slightly if the company issues preferred dividends.

Step 1

Obtain the income statement of the company in question. The income statement, also known as a profit and loss statement in some jurisdictions, will contain information such as operating income, income tax expense and losses if it is to comply with the International Accounting Standards Board.

Step 2

Obtain the necessary information from the income statement needed for your calculation. Specifically, you will need the basic earnings per share, the net income, and, if any, preferred dividends. If the company is publicly listed, it is required by law to supply this information on a quarterly basis.

Step 3

Subtract the preferred dividends for the quarter from the company's net income, if the company issues preferred stock. Then, divide the basic earnings per share by this value. This will give you the weighted average number of common shares outstanding, if the company issues preferred stock.

Step 4

Divide basic earning per share by net income. This gives you the weighted average number of common shares outstanding for a given quarter, if the company does not issue preferred stock.

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