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In a corporation, what is the term for the number of shares a corporation is permitted to sell, as set when the shares are first established?
AShares authorised
BShares issued
CShares outstanding
DTreasury shares
Answer & Solution
Correct answer: A. Shares authorised
1. Authorised shares are the maximum a corporation may legally sell, like a credit-card limit.
2. Issued shares are those actually sold to investors for the first time.
3. Outstanding shares are issued shares minus treasury shares held back.
4. Therefore the permitted maximum is the shares authorised.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.2 "Corporations and Stockholders' Equity", p.246_
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