Capital Stock


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.


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BREAKING DOWN '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.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  4. Assessable Capital Stock

    The capital stock of any bank or financial institution that could ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
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  1. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

    An increase in the total of capital stock showing on a company's balance sheet is bad for investors, because it represents ... Read Full Answer >>
  2. How do companies report the value of their capital stock?

    A company's capital stock shows up in the shareholders' equity portion of the balance sheet. There are two general methods ... Read Full Answer >>
  3. What's the difference between a capital stock and a treasury stock?

    Capital stock and treasury stock describe two different types of a company's shares. Capital stock is the total amount of ... Read Full Answer >>
  4. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  5. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  6. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>

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