authorized capital 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.

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authorized capital stock

The number of shares of capital stock that a business may issue. Authorized capital stock is stated in a firm's articles of incorporation; changes in it may occur only if approved by the stockholders. The number of shares authorized often greatly exceeds the number actually issued. In this way, management can issue more shares to raise additional funds, or it can use the shares to make an acquisition. Also called shares authorized.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.