Outstanding shares refers to stock that is currently held by investors, including shares held by the public, and restricted shares that are owned by company officers and insiders. The number of outstanding shares can change in response to such events as the company issuing new shares, repurchasing existing shares and employee options being converted into shares. The weighted average shares outstanding, or the weighted average of outstanding shares, is a calculation that takes into consideration any changes in the number of outstanding shares over a specific reporting period. The weighted average number of shares is determined by taking the number of outstanding shares and multiplying it by the percentage of the reporting period for which that number applies, and doing this for each period. In other words, the formula takes the number of shares outstanding during each month, weighted by the number of months that those shares were outstanding.

The weighted average shares outstanding figure is used to calculate key financial metrics such as earnings per share. Basic EPS, for example, is calculated as follows:

Basic EPS = (net incomepreferred dividends) / weighted average shares outstanding

Basic weighted average shares, on the other hand, represents the above-mentioned weighted average shares outstanding, less the dilution of stock options for a specific period. In "basic weighted average shares," the term "basic" essentially means non-dilutive. Dilution occurs when a company issues additional shares that reduce an existing investor's proportional ownership in the company. Companies that have simple capital structures only need to report basic EPS. Those with complex structures (those that have potential dilutive securities) must report both basic EPS and diluted EPS.