- Learn Basic Accounting in Less than 1 Hour!
- Accounting Basics
- What are Accounting Principles
- Accounting Cycle
- Accrual Accounting Basis
- Cash Basis Accounting
- Matching Principle of Accounting
- Conservatism Principle of Accounting
- Cash Accounting
- What are Accounting Policies?
- Accounting Estimates
- Mark to Market Accounting
- Cash Accounting vs Accrual Accounting
- Operating Cycle
- Fiscal Year
- Fiscal Year vs Calendar Year | Top Differences | Examples |
- Financial Reporting
- Financial Statements
- Accrual vs Provision
- Accrual vs Deferral
- Temporal Method
- Interim Financial Statements
- Consolidated Financial Statement
- Audited Financial Statements
- Interim Reporting
- Accounting Scandals
- Quality of Earnings
- Audit Risk
- Sunk Cost
- Leasehold vs Freehold
- IFRS vs US GAAP
- IFRS vs Indian GAAP
- Accounting for Fair Value Hedges
- Debit vs Credit in Accounting
- Single Entry System in Accounting
- Double Entry Accounting System
- Journal in Accounting
- General Journal
- Accounting Journal Entry
- Ledger in Accounting
- Journal vs Ledger
- General Journal vs General Ledger
- What is Trial Balance ? | Examples | Steps | Prepare | Errors
- Adjusted Trial Balance
- Reconciliation of Books | Types, Best Practices | Useful Tips
- Petty Cash | Meaning | Template | Accounting | Example
- Petty Cash Book
- Debit Note | Debit Notes Accounting & its Top Characteristics
- Credit Note
- Debit Note vs Credit Note | Top 7 Differences (Infographics)
- Drawing Account
- Balance Sheet
- Balance Sheet
- Accounting Equation
- Assets vs Liabilities | Top 9 Differences (with Infographics)
- Trial Balance vs Balance Sheet | Top 10 Differences You Must Know!
- Balance Sheet vs Consolidated Balance Sheet
- Bank vs Company Balance Sheet
- Commitments and Contingencies
- Management Discussion & Analysis
- Revenue Reserve vs Capital Reserve | Top 7 Differences
- Revenue Reserve
- Capital Reserve
- Capital Receipts vs Revenue Receipts | Top 8 Differences
- Capital Lease vs Operating Lease | Top Differences You Must Know!
- Debt vs Equity Financing | Advantages | Disadvantages | Example
- Internal vs External Financing | Top 7 Differences (Infographics)
- Available for Sale for securities
- Held to Maturity to securities
- Non-Performing Assets (NPA)
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- Closing Stock
- Inventory vs Stock
- Current Assets
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Accounts Receivables Factoring
- Trade Receivables
- Net Realizable Value (NRV)
- Allowance for Doubtful Accounts
- Accrued Revenue
- Liquid Assets
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Prepaid Insurance
- Tangible vs Intangible Assets
- Tangible Assets
- Deferred Tax Assets
- Capital Expenditure (Capex)
- Capex vs Opex
- Salvage Value
- Residual Value
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Negative Goodwill
- Goodwill Valuation
- Capitalized Interest
- Accounts Payable | Days Payable Outstanding | Formula |
- Current Liabilities | List of Current Liabilities on Balance Sheet
- Accrued Liabilities
- Notes Payable
- Revolving Credit Facilities
- Bonds Payable Accounting
- Bad Debt Reserve Allowance
- Deferred Expenses
- Deferred Tax Liabilities
- Unearned Revenue (Sales)
- Deferred Revenue (Income)
- Current Portion of Long-Term Debt (CPLTD) | Balance Sheet
- Long-Term Debt in Balance Sheet
- Financial Liabilities | Definition, Types, Ratios, Examples
- Long-Term Liabilities
- Accounts Receivable vs Accounts Payable
- Minority Interest
- Accounting for Convertibles
- Accounting for Derivatives
- Financial Lease vs Operating Lease
- Off balance Sheet Financing
- Finance vs Lease
- Triple Net Lease
- Shareholders Equity
- Shareholders Equity Statement
- Negative Shareholders Equity
- Par Value of Stock
- Share Capital
- Outstanding Shares (Definition, Formula) | Stocks Outstanding
- Additional Paid-in Capital on Balance Sheet
- Retained Earnings (Formula, Examples) | How to Calculate?
- Appropriated Retained Earnings
- Unappropriated Retained Earnings
- How to Calculate Net Worth of a Company | Formula | Top Examples
- Owners Equity
- Preferred Shares
- Weighted average Shares average outstanding
- Share Buyback
- Accelerated Share Repurchase
- Restricted Stocks Units (RSUs)
- Contingent Shares
- Stock Splits Share
- Treasury Stock Shares
- Dilutive Securities
- Anti Dilutive Securities
- Stock Dividend
- Cash Dividend
- Final Dividend
- Preferred Dividends
- Homemade Dividends
- Ex dividend date
- Date of Record of dividends
- Qualified vs Ordinary Dividend
- Cost of preferred Stock
- Common Stock vs Preferred Stock | Top 8 Differences You Must Know
- Stocks Vs Shares
- Stock Options Vs RSU
- Shareholder Equity vs Net Worth | Top 5 Differences You Must Know!
- Stock vs Option
- Stock vs Mutual Funds
- Income Statement
- Income Statement | Top Examples | Template | Format | Analysis
- Cost of Goods Sold
- Direct Costs
- Indirect Costs
- Prime Cost
- LTM EBITDA
- Non Recurring Items
- EBIT vs EBITDA | Top Differences | Examples | Calculation
- Depreciation – Formula | Types | Most Comprehensive Guide
- EBITDA vs Operating Income
- Straight Line Depreciation Method
- Sum of Year Digits Method of Depreciation
- Declining Balance Method of Depreciation
- Land Depreciation
- Double Declining Balance Method
- Amortization of Intangible Assets
- Depreciation vs Amortization
- Unrealized Gains (Losses)
- Non Cash Expense
- Share based compensation
- Restructuring Cost
- Extraordinary Items
- Interest Income
- Double Taxation
- Net Loss
- Net Operating Loss (NOL)
- Tax Shield
- Sundry Expenses
- Trade Discount
- Percentage of Completion Method
- Interest vs Dividend | Top 9 Differences (with Infographics)
- EBITDA vs Net Income
- EBIT vs Net Income
- EBIT vs Operating Income
- Cost vs Expense
- Accounting Profit vs Economic Profit
- Income Tax vs Payroll Tax
- Tax credits vs Tax deductions
- Gross Income vs Net Income
- Profit vs Revenue
- Revenue vs Earnings
- Revenue vs Net Income
- Revenue vs Income
- Profit vs Income
- Revenue vs Sales
- Capitalization vs Expensing
- Income Statement vs Balance Sheet | Top 5 Differences You Must Know!
- Statement of Comprehensive Income | Items | Colgate Example
- Partial Income Statement
- Income Summary Account
- FOB Destination
- Explicit Cost
- Implicit Cost
- Direct cost vs Indirect Cost
- Fixed cost vs Variable cost
- Nopat vs Net Income
- Marginal Costing vs Absorption Costing
- Margin vs Markup
- Contribution Margin vs Gross Margin
- Cash Flow Statement
- Cash flow from Operations | Formula, Calculations & Examples
- Cash Flow from Investing Activities (Formula & Top Examples)
- Cash Flow From Financing Activities | Formula & Calculations
- Cash Flow Analysis
- Fund Flow Statement
- Direct vs Indirect Cash Flow Methods
- Cash flow vs Net Income | Key Differences & Top Examples
- Cash Flow vs Fund Flow | Top 8 Differences (with Infographics)
- Accounting Careers
- Accounting Interview Questions
- Financial Accounting Careers
- Top Accounting Firms
- Big Four Accounting Firms
- Forensic Accounting
- Cost Accounting
- Financial Accounting
- Accounting vs Engineering
- Finance vs Accounting
- Bookkeeping vs Accounting
- Accounting vs Auditing
- Accountant vs Actuary
- Bookkeepers vs Accountants
- Accounting vs Financial Management
- Cost Accounting vs Financial Accounting
- Cost Accounting vs Management Accounting
- Financial Accounting vs Management Accounting
- Public vs Private Accounting
- Accounting vs CPA
- Controller vs Comptroller
- Personal Banker Job Description
- Accounting Firms in Australia
- Accounting Firms in Canada
- Top Accounting Firms in US
- Accounting Firms in Singapore
- Accounting Books
What is Weighted Average Shares Outstanding?
Weighted average shares outstanding is a number of shares of the Company after incorporating changes in the shares during the year. The number of shares of a Company can vary during the year due to various reasons like buyback of shares, new issue of shares, share dividend, stock split, conversion of warrants etc. Thus, while calculating Earnings per Share the Company needs to find the weighted average number of shares outstanding. Thus, calculation of weighted average outstanding shares incorporates all such scenarios of changes in the weighted average number of shares to give a fair Earnings per share value.
Steps to Calculate Weighted Average Shares Outstanding
Following are the three steps to calculate weighted average shares outstanding.
- The first step is to find the common shares count at the beginning of the year along with teh changes in common shares during the year.
- Calculate the updated common shares after each change.
- Issuance of new shares increases the common share count
- Repurchase of shares reduces the common share count.
- Weight the shares outstanding by the portion of the year between this change and next change: weight = days outstanding / 365 = months outstanding / 12
WallStreetMojo Free Accounting Course
You will Learn Basics of Accounting in Just 1 Hour, Guaranteed!
* Please provide your correct email id. Login details for this Free course will be emailed to you
Weighted Average Shares Oustanding Calculation
Let us consider the following example and incorporate various scenarios which can affect the weighted average number of shares outstanding.
#1 – No New Shares Issued
Let there be a Company A which has 100 thousand shares outstanding at the start of the year i.e. 1 January. The Company did not issue any new shares.
- Thus, weighted average shares outstanding = (100000 X 12)/ 12 = 100000
We multiplied the number by 12 for each month and did an average over these 12 months. Since no new shares were issued in this case each month had 100 thousand shares outstanding and hence, over the year the Company had 1 thousand shares outstanding.
#2 – The Company Issues New Shares Once During the Period
Now, the Company A issued 12 thousand new shares on 1 April.
- Thus, the Company had 100 thousand shares for the first 3 months and 112000 shares for the rest of the 9 months.
- Thus, weighted average shares outstanding in this case = (100000*3 + 112000*9)/12 = 1308000/12 = 109000
- Thus, weighted average shares outstanding in this case, the Company has 109,000 shares outstanding at the end of the year.
Clearly, we pro-rated the weighted average number of shares according to their duration or to put it in the simple way the funds generated from issuing new shares were available to the Company for 9 months only, hence these number was pro-rated.
#3 – Company Issues New Shares Twice During the Year
The Company A issued another 12 thousand shares on 1 October during the year. Let us seen how the weighted average number of shares outstanding will change.
- Thus, the Company has 100 thousand shares during the first 3 months, 112000 shares during the next 6 months and 124000 shares during the last 3 months of the year
- Thus, weighted average shares outstanding in this case = (100000*3 + 112000*6 + 124000*3)/12 = 1344000/12 = 112000
- Thus, weighted average shares outstanding in this case, the Company has 112,000 shares outstanding at the end of the year.
- Hence, from this example, we can say whenever there is the new issuance of share we will add them to the existing number of shares and prorate during the part of the year they were available for the Company.
However, the case changes whenever the Company does a stock split or a share reverse.
First, let us consider the Company has done a stock split.
#4 – The Company has Split the Shares in the Ratio 1:2
Now, taking on from the above scenario, the Company did a split of shares in the ratio 1:2 i.e. an investor received 1 extra share for one share each.
Let the Company A split the shares on 1st December.
- Now, in such a case, all the previous shares in the Company are also multiplied by 2. This is because the value of the shares is the same before and after the stock split. The investor does not lose or gain by such measure.
- Hence, the weighted average number of shares will be = (200000*3 + 224000*6 + 248000*3)/12 = 2688000/12 = 224000
- Thus, the weighted average number of shares outstanding has also doubled by doing a stock split.
Now, let us consider the scenario of a share reverse. A share reverse is nothing but opposite of the stock split. If the investor holds 2 shares in the Company, he will now have 1 share.
#5 – The Company has done a Share Reverse in the Ratio 2:1
Now, taking on from the above scenario, the Company did a share reverse in the ratio 2:1 i.e. an investor will now have 1 share for every 2 shares held in the Company
Let the Company A did a share reverse on 1st December.
- Now, in such a case, all the previous shares in the Company are divided by 2.
- Hence, the weighted average number of shares will be = (50000*3 + 56000*6 + 62000*3)/12 = 672000/12 = 56000
- Clearly, after share reverse, the number of outstanding shares has halved.
#6 – The Company has Bought Back Shares
We have seen various corporate actions above and their treatment of the weighted average outstanding shares. Now, let us look into buyback of shares. If the Company buys back the shares, they are treated in the similar way as the shares are issued but in the opposite, that the shares are reduced from the calculation.
From the scenario 3, the Company A buys back 12000 shares on 1 October.
- Thus, the Company has 100 thousand shares during the first 3 months, 112000 shares during the next 6 months and 100000 shares again during the last 3 months of the year
- Thus, weighted average shares outstanding in this case = (100000*3 + 112000*6 + 100000*3)/12 = 1272000/12 = 106000
- Thus, the Company has 106,000 shares outstanding at the end of the year.
Weighted Average Share Calculation Example #1
Below is the example of Weighted Average Shares calculation when shares are issued as well as repurchased during the year.
Below table shows the weighted averages shares outstanding calculation in a tabular format.
Weighted Average Share Outstanding Calculation Example #2
This second example of weighted average shares outstanding calculation considers the cases when shares are issued and stock dividends are given during the year.
Below table shows the weighted averages shares outstanding calculation in a tabular format.
Weighted average outstanding shares is an important factor while calculation Earnings per share for the Company during the period of time. Since, the number of shares of the Company keeps changing due to various corporate actions like new issue of shares, buyback of shares, stock split, stock reverse etc. and the new shares or the shares bought back were available with the Company for a proportion of the year, it makes sense to prorate the shares to find a weighted average.
This has been a guide to what are weighted average shares outstanding. Here we look at the steps to calculate weighted average shares outstanding in cases of share issuance, share repurchase, stock dividends, stock splits, share reverse and more. You may have a look at these articles below to learn more about accounting –