Multiple Choice
The number of shares authorized is set forth in the company's:
12. Stockholders' Equity
Shares Authorized, Issued, and Outstanding
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The number of shares that a corporation’s charter allows it to sell is referred to as:
A
Authorized shares
B
Outstanding shares
C
Treasury shares
D
Issued shares
Verified step by step guidance1
Understand the concept of 'Authorized shares': These are the maximum number of shares that a corporation is legally allowed to issue as specified in its charter. This is determined during the incorporation process and can be amended later if needed.
Differentiate 'Authorized shares' from other types of shares: Outstanding shares refer to shares currently held by shareholders, Treasury shares are shares repurchased by the company, and Issued shares are shares that have been sold to investors (a subset of authorized shares).
Review the corporation's charter: The charter explicitly states the number of authorized shares, which is the upper limit of shares the company can issue.
Understand the hierarchy: Authorized shares encompass all shares the company can issue, while issued shares and outstanding shares are subsets of this total.
Conclude that the term 'Authorized shares' is the correct answer based on the definition provided and its distinction from other types of shares.
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