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Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.  The company’s corporate charter establishes the capital stock amount. This is a matter of public record since every corporation must file a charter in the state in which they are incorporated.

The amount of capital stock is listed in the balance sheet (or accompanying notes) of any corporation that has audited financial statements.  For publicly traded corporations, the amount of capital stock is very high, usually amounting to hundreds of millions of shares.  This is because the amount of capital stock listed in the corporate charter is the maximum amount a corporation can issue to shareholders, not the amount they actually DO issue to shareholders.  If they want to exceed the established capital stock maximum, the corporation must amend its corporate charter. 

Note that the amount of outstanding shares, as listed in the equity section of a company’s balance sheet, does not usually equal the capital stock.  As stated, companies rarely issue all of their capital stock.  Usually they keep a substantial amount in reserve to sell and raise funds for growth.  Nevertheless, in analyzing a company’s capital stock, investors pay attention to the frequency of capital stock sales. A company with frequent capital stock offerings may have profitability issues and thus can’t fund its growth through earnings.

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