Authorized and Restricted

Authorized shares are the maximum number a company can issue. Some of these are restricted shares and normally given to company insiders. Restricted shares are traded by special permission from the Securities and Exchange Commission.

The Float

The float is the number of shares available to the general public. The float volume fluctuates based on stock buyback, option and warrant activity.

Outstanding Shares

The sum of restricted shares plus shares in the float are called outstanding shares. Shares kept in the company treasury are not included in the calculation. Since float volume fluctuates the number of outstanding shares fluctuates as well.

In Practice

XYZ Corp. has authorized the issuance of 1,000 shares. Fifty shares are issued to company insiders, 750 issued to the general public and 200 are kept in the treasury. The total number of outstanding shares is 800 (50 restricted + 750 in the float).

Market Capitalization

Market capitalization (market cap) is used to determine a company's value. Market cap is calculated by multiplying the number of outstanding shares by the price of one share. If XYZ Corp. trades at $5 per share, it has a market cap of $4,000 ($5 per share X 800 outstanding shares).

Source:

Investopedia: Basics of Outstanding Shares and The Float