Authorized vs issued shares: which statement is true?

Authorized vs issued shares: which statement is true?

• A. Issued shares increase with authorization
• B. Authorized shares exceed issued shares
• C. Treasury stock increases with authorization
• D. APIC decreases with more authorization

Answer: (B)

Authorized shares are the maximum number a company can issue, as set in the charter, while issued shares are the actual number that have been sold or granted. Because a company often does not issue all the shares it is allowed to, the authorized count is typically greater than the issued count. So the true statement is that authorized shares exceed issued shares. Treasury stock would only rise if the company buys back shares, which is independent of how many shares are authorized. APIC (additional paid-in capital) changes when shares are issued above par value, not simply because the charter increases authorization.

Authorized shares are the maximum number a company can issue, as set in the charter, while issued shares are the actual number that have been sold or granted. Because a company often does not issue all the shares it is allowed to, the authorized count is typically greater than the issued count. So the true statement is that authorized shares exceed issued shares.

Treasury stock would only rise if the company buys back shares, which is independent of how many shares are authorized. APIC (additional paid-in capital) changes when shares are issued above par value, not simply because the charter increases authorization.