There are two main ways to invest in the stock market: through stocks and through bonds. A stock represents a unit of ownership in a company, and a bond represents a loan from the customer to the company. Within the world of stocks, there are preferred stocks and common stocks. Common stock differs in many ways from preferred stock, and is junior to preferred stock in terms of seniority for bankruptcy; however, only common stock holders have voting rights.
The Annual Report
Obtain the annual report. The annual report is usually posted and available for download on the company's website. You can also contact the Investor Relations department to request one.
Go to the notes to the balance sheet and scroll down to the section titled "Stockholders' Equity." Search for the term "authorized shares." This is the total number of shares the company can possibly issue. Assume the company has one million authorized shares. While the total number of authorized shares is not in the calculation for outstanding shares, it is helpful to know the upper threshold for outstanding shares to check your calculation.
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Determine the number of treasury shares. This the number of shares given to executives of the company and will usually be its own line item in the "Stockholders' Equity" section. If not, look in the notes to the balance sheet, which are immediately following the financial statements. Assume the company issued 100k common stock to executives of the company.
Determine the number of shares issued to the public as common shares. This number can also be found in the notes to the financial statements. Assume the number of shares issued is 300,000.
Calculate the Outstanding Common Stock
Add the treasury shares to the number of common stock issued to the public for total shares outstanding. The calculation for this example is 100,000 plus 300,000 equals 400,000.