On The Date Of The Financial Statements, Common Stock Shares Issued Would Exceed Common Shares Outstanding As A Result Of What?


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Adnan Manzoor Profile
Adnan Manzoor answered
At the time of announcing results for the year, the equity position of the company show the results higher than the shares outstanding because of the profits of the company have been added back to the common shares issued amount so that it make them higher than the shares outstanding.

The practice all over the world is that when company announces its results, if profits are earned by the company in that year, some portion of that profit is retained back into the business and some portion is given to the shareholders as dividend. Companies also create some reserves out of misappropriated profits.

it is only at that point that the common shares issued because of increase in profits that they increase from common shares outstanding. Also one of the most important thing that also been taken into consideration is the fact that if companies issue right shares to their existing shareholders instead of dividend, than in that case also the common shares issued would exceed the common shares outstanding because shares issued to the existing shareholders are right shares and they increase the stakes of the existing shareholders in the business and give them more confidence in the company.

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