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What is Capital Stock?

It is not unusual for a company to issue both common stock along with preferred stock as part of the overall strategy.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 November 2014
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Capital stock has to do with all the shares of stock that represent the ownership of a given company. The exact number of shares that can be issued in the way of capital stock is normally recorded in the current balance sheet for a company. Capital stock will involve all types or classes of stock that the company is authorized to issue.

The basis for issuing capital stock is normally outlined in the charter of the corporation. Often, the charter will specify not only the number of shares that can be included as part of the issuance, but also define the class or classes of stock that the corporation will release for issue. It is not unusual for a company to issue both common stock along with preferred stock as part of the overall strategy. The common stock may be provided to hourly employees of the company as part of the benefit package, while the preferred stock is open for issue to any outside investor.

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Generally, capital stock is issued at a nominal value, but may increase in value over time. There is also the possibility of additional shares of capital stock coming available as the company expands its operations and begins to realize higher profits. When this happens, it is necessary for current investors to work with board members to amend the charter of the company, making it legal to issue more shares of stock. At the same time, the company must work within the financial laws currently in place in the country of jurisdiction to determine the maximum number of shares that the company can publicly trade.

The charter of the company will also address the total value of stock that can be issued. This total value will of course impact the number of shares of capital stock that the corporation can issue under current circumstances. Generally, when the charter is amended and the Articles of Association updated, existing stockholders are notified and given the opportunity to purchase the newly issued shares on the open market.

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anon123854
Post 7

I am looking to start a non-profit organization. how do I determine the maximum number of shares of stock that the corporation is authorized to have outstanding at any one time. -still green

anon73312
Post 6

I have some shares dating back to 1919 from a company called atlantic Marl Lime and Fertilizer Corporation. How do I find out the value?

bntoone
Post 5

How do I find out the worth of a bloomingdom oiling company capitol stock purchased in july of 1919? There are 200 shares. There is also another stock for Colorite inc. purchased January 1971 and there are 147 shares.

akraft
Post 4

How do you go about finding the value of an old stock? I have a certificate for 68 shares of the Indian Foot Oil Company from Chewelah, Washington that was purchased in 1932.

Thanks for any advice!

mdt
Post 3

All very good questions. You may want to consider submitting these as topics to wiseGEEK. At the top of the screen, you will see a drag down menu "wiseGEEK features"; click on the arrow and move down to select "Suggest A Topic". All the questions in your comments would make excellent topics for articles.

charlesubele
Post 2

what are difference between preferred stock and value stock? what are the most inportant things that I need to know when establishing my business as an enterprenuer.

charlesubele
Post 1

what are the accounting concept and convention? and sometimes we talk about shares and debenture, what are the similarities between shares and debenture.

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