Investors should understand the concept of common stock. Each share of common stock provides its owners with a partial ownership of a company. The more shares owned, relative to the pool of shares that have been issued, the greater the degree of ownership by the investor.
There are three categories of stock that should be well-understood by investors:
Treasury stock is a little strange. It does not earn dividends. It just exists, ready to be retired, or sold again.
Being able to derive the number of shares in one category from the other two is a critical skill for any investor. It will help him weigh the cost of a share against its claim on the company's net assets and future income streams.
The basic equation is as follows:
ISSUED = OUTSTANDING + TREASURY