Capital Stock

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DEFINITION of 'Capital Stock'

The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents the size of the equity position of a firm and can be found on the balance sheet (or notes) of a typical financial statement. Firms can both issue more capital stock, or buyback shares that are currently owned by shareholders.

INVESTOPEDIA EXPLAINS 'Capital Stock'

In financial statement analysis, an increasing capital stock account tends to be a sign of economic health, since the company can use the additional proceeds to invest in projects or machinery that will increase corporate profits and/or efficiency. On the other hand, however, firms that continually issue secondary issues of capital stock may be doing so to raise funds, due to poor company performance.

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