capital stock

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Capital stock

Stock authorized by a firm's charter and having par value, stated value, or no par value. The number and the value of issued shares are usually shown, together with the number of shares authorized, in the capital accounts section of the balance sheet. See: Common stock.

Authorized Shares

The maximum number of shares a company is allowed to issue. Generally, the company's charter specifies the number of authorized shares, but shareholders can increase or decrease it according to procedures listed in the charter. Typically, the number of authorized shares is larger than the required amount in order to give a company the greatest amount of flexibility. Authorized shares are also called authorized capital stock or simply authorized stock.

capital stock

Any of various shares of ownership in a business. These shares include common stock of various classes and any preferred stock that is outstanding. If a firm has only a single class of capital stock outstanding, the terms common stock and capital stock are often used interchangeably. See also authorized capital stock, outstanding capital stock, stock class.

capital stock

the total amount of capital GOODS (plant, offices, machinery and equipment) currently available to a firm or an economy with which to produce goods and services. The firm's/economy's capital stock requires maintaining by INVESTMENT to replace worn out or obsolete capital items (see DEPRECIATION) but more importantly the size of the capital stock can be increased over time by new investment. Capital formation or accumulation plays a crucial role in expanding the firm's/economy's productive capacity and hence its ability to sustain a high rate of business growth and ECONOMIC GROWTH.

capital stock

the net accumulation of a physical stock of CAPITAL GOODS (buildings, plant, machinery, etc.) by a firm, industry or economy at any one point in time (see POTENTIAL GROSS NATIONAL PRODUCT).

The measurements most frequently used for the value of a country's capital stock are from the NATIONAL INCOME and expenditure statistics. These statistics take private and public expenditure on capital goods and deduct CAPITAL CONSUMPTION (see DEPRECIATION 2) to arrive at net accumulation (which may be positive or negative). The more relevant value of capital stock, from the economist's point of view, is the present value of the stream of income such stock can generate. More broadly, the size of a country's capital stock has an important influence on its rate of ECONOMIC GROWTH. See CAPITAL ACCUMULATION, CAPITAL WIDENING, CAPITAL DEEPENING, DEPRECIATION METHODS, PRODUCTIVITY, CAPITAL-OUTPUT RATIO.

Capital Stock

Shares of stock that represent ownership of a portion of the corporation.