Outstanding Shares is a very easy concept to understand. Basically it is the number of stocks that are held by investors. This includes restricted shares owned by company officers and insiders, as well as common shares held by the public. If a company buys back stock, these shares are not considered outstanding.

When a company buys back its own shares on the open market and returns these shares to the company treasury, this reduces both the float and the number of outstanding shares. If a company has sufficient cash to purchase shares, in theory these purchases could eventually buy all the outstanding shares, which is essentially the same as taking the company private.

Outstanding Shares number is shown on a company's balance sheet under the heading "Capital Stock" and is more important than the authorized shares or float. It is used to calculate many metrics, including market capitalization and earnings per share (EPS).