Common stock is issued to raise money for its business. No-par common stock has no par value, which is the legal capital of the stock that cannot be paid out as dividends. A company reports the entire amount of money it has received from issuing no-par common stock in a single account on its balance sheet to disclose the amount of money investors have contributed to the company. You can calculate the amount of a company’s common stock on its balance sheet after it issues no-par common stock using information from its annual report.
1. Find the number of shares of no-par common stock a company issued during the year, and the issue price per share in its 10-K annual report. You can obtain a public company’s 10-K annual report online from the investor relations section of its website, or from the U.S. Securities and Exchange Commission’s EDGAR online database. For example, assume a company issues 500,000 shares of no-par common stock for $10 per share.
2. Multiply the number of shares issued by the issue price per share to calculate the total proceeds from issuing the no-par common stock. Continuing with the example from the previous step, multiply 500,000 shares by $10 per share to get $5 million in proceeds from issuing the no-par common stock.
3. Find a company’s balance sheet in its annual report from the year prior to issuing the no-par common stock. Identify the balance of its common stock account in the stockholders’ equity section of the balance sheet. In this example, assume the company had $10 million in common stock on its balance sheet prior to issuing the no-par common stock.
4. Add the previous balance of the company’s common stock, and the proceeds from issuing the no-par common stock to calculate the common stock balance after issuing the stock. In this example, add $10 million and $5 million to get $15 million in common stock after the issuance.
- Monitor the amount of a company’s common stock. A company that consistently issues more common stock may not be generating enough money from its operations to fund its business.