Difference Between Issued Shares vs Outstanding Shares
Share capital holds the weight equivalent to the importance of electricity in the house. It’s the lifeline for the company. Any activity, operations, decisions, strategy till vision and mission of the company are highly dependent on the availability of the share capital with the company. The share capital is the unit of the company’s ownership obtained in lieu of monetary payment or on performing any specific obligation. The share capital is the main source of money for the operations of the company. In India, Share capital is needed to be maintained under the statutory provisions of the Companies Act, and any non-compliance with the same will result in penalty or imprisonment or both. Also, SEBI has its own prescribed guidelines to control the movement as well as trading of the capital of the companies whose shares are listed on the stock exchange.
As per Companies Act, Share capital can be either equity or can be with some preference. Structure of both the share capital is same, the only difference is that preference share capital will always have preference over common equity share capital and will have some additional statutory requirements which corporates must have to follow. In order to raise the share capital, there are various procedures which every company have to follow. By way of Initial Public Offering (IPO), companies are raising their funds to carry out the operations of the company. The said capital can be raised only up to the authorized share capital, which means the monetary amount up to which company can raise the funds from the public in form capital during its whole life. Also, during IPO, companies are having the option to either call complete authorized share capital or to call a partial amount.
Issued Share Capital:
Out of Authorised share capital, the shares which company is issuing to the public for raising the funds are termed as Issued share capital. These shares will be issued to the public and will be listed on the exchange for easy buy-sell of the said shares in the market.
Outstanding Share Capital:
Out of Authorised share capital, the shares which company has not issued to the public, and are kept as a buffer by the company are termed as outstanding share capital. During the lifetime, the company can again issue outstanding shares to the public and can convert outstanding shares to Issued share capital.
So, the process of any share capital will be as given below:
Let’s take an example to understand the same:
An Ltd having authorized share capital of 10 lakhs of Rs 10 each. An Ltd goes for the public raising of the funds, in which they raise Rs 60 lakhs by issuing 6 lakh shares. Here, 6 lakh shares will be termed as issued shares and 4 lakh shares will be termed as outstanding shares.
Issued Shares vs Outstanding Shares (Infographics)
Below is the top 9 difference between Issued Shares vs Outstanding Shares:
Key Differences between Issued Shares vs Outstanding Shares
Let us discuss some of the major differences between Issued Shares vs Outstanding Shares:
- Issued shares give monetary benefit to the company while outstanding shares do not give any monetary benefit to the company.
- In determining the book value of the company, issued shares form the part of the calculation, however, outstanding shares are excluded in the said calculation.
- A dividend is always getting paid on the issued shares, however, outstanding shares are not authorized to receive a dividend.
- Issued shares have the right to vote in the general meetings, while outstanding shares can vote.
- Issued shares give the privilege of ownership, while outstanding shares do not give ownership to anyone
- Issued shares can be easily bought and sell from the stock exchange, while outstanding shares are not tradable.
- Treasury stock forms the part of issued shares, while outstanding excludes the same. However, when a company sells the treasury shares, then it will form part of the outstanding shares.
- In the financial statement, issued shares will form part of the share capital under the authorized share capital, while outstanding shares are to be disclosed as a part of the corporate governance report.
Issued Shares vs Outstanding Shares Comparison Table
Let’s look at the top 9 Comparison between Issued Shares vs Outstanding Shares
|The basis Of Comparison between Issued Shares vs Outstanding Shares||
|Monetary Flow||Issued Shares give monetary supply to the company||Outstanding shares do not provide any monetary supply.|
|Book Value||In calculating book value, Issued shares are considered||In calculating book value, outstanding shares are excluded|
|Dividend Payout||Dividend get paid on issued shared only||A dividend does not get paid on outstanding shares|
|Voting Rights||Voting rights are attached with issued shares||No voting rights are attached with outstanding shares|
|Ownership Stake||Issued shares form part in verifying the owned capital of the company||Outstanding shares do not form part of the ownership stake i.e., owned capital of the company|
|Tradability||Issued shares are tradeable in the market||Outstanding shares cannot be traded in the market|
|Treasury Stock||Treasury stock, even though not issued, forms part of Issued shares||Treasury stock do not form part of outstanding shares|
|Quantum||Issued shares must be always greater than or equal to outstanding share capital||Outstanding shares must be always lower than or equal to issued share capital|
|Disclosure in financial statement||In India, Issued shares must be disclosed under the share capital in the balance sheet||In India, Outstanding shares are must to disclosed in the Corporate governance report as needed under the regulation of SEBI|
As an investor, to understand the difference between Issued Shares vs Outstanding Shares will help them in doing accurate calculations of financial ratios. Otherwise, they will result in inflating gains, with which they may offset a realized loss. As financial Investors, a person should have a proper understanding of underlying terms in order to make correct decisions for their investment perspective which will help them in earning realistic and realized a high profit.
This has a been a guide to the top difference between Issued Shares vs Outstanding Shares. Here we also discuss the Issued Shares vs Outstanding Shares key differences with infographics and comparison table. You may also have a look at the following articles to learn more.