Which term describes the maximum number of shares a company can issue?

Which term describes the maximum number of shares a company can issue?

• A. Authorised share capital
• B. Outstanding share capital
• C. Contributed surplus
• D. Inventory

Answer: (A)

Authorized share capital is the maximum number of shares a company is allowed to issue, as stated in its charter. This cap sets the ceiling for how many shares can be issued to investors, and it can be increased only by amending the charter (usually with shareholder approval). Issued shares are the portion actually issued, and outstanding shares are those currently held by investors (issued minus treasury shares). Contributed surplus is a separate equity item representing extra paid-in capital, not related to how many shares can be issued. Inventory is a current asset. Therefore, the term that describes the maximum number of shares a company can issue is authorized share capital.

Authorized share capital is the maximum number of shares a company is allowed to issue, as stated in its charter. This cap sets the ceiling for how many shares can be issued to investors, and it can be increased only by amending the charter (usually with shareholder approval). Issued shares are the portion actually issued, and outstanding shares are those currently held by investors (issued minus treasury shares). Contributed surplus is a separate equity item representing extra paid-in capital, not related to how many shares can be issued. Inventory is a current asset. Therefore, the term that describes the maximum number of shares a company can issue is authorized share capital.