The number of additional shares that must be added back to the basic share count is calculated as the difference between the assumed share count from the options and warrants exercise and the share count that could have been purchased on the open market.
Treasury Stock Method Formula:
- Additional shares outstanding = Shares from exercise – repurchased shares.
- Additional shares outstanding = n – (n x K / P)
- Additional shares outstanding = n (1 – K/P)
The formula for calculating Outstanding Shares = Total Issued stock – Treasury shares. So, in the above example, the outstanding shares of FoodZilla Ltd would be 8,000 shares with 2,000 shares as treasury shares.
What Is Treasury Stock (Treasury Shares)? Treasury stock, also known as treasury shares or reacquired stock, refers to previously outstanding stock that is bought back from stockholders by the issuing company. The result is that the total number of outstanding shares on the open market decreases.
Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet. Treasury stock will be a deduction from the amounts in Stockholders’ Equity.
A company’s number of shares outstanding is the number of shares investors and company executives currently own, while the number of issued shares is the number of shares that have ever been traded in the stock market.
Divide the treasury stock’s total cost by the number of shares to calculate the average price the company paid for its treasury stock. Continuing the example, divide $1 million by 100,000 to get a $10 average price per share of treasury stock.
Shares outstanding is a stock market term that refers to all of the available stocks currently available to be purchased and held by investors. Shares outstanding do not include the stock in the treasury that have been repurchased by the company, but instead only the ones that shareholders currently own.