Capital stock, also known as authorized stock, refers to all common stock and preferred stock a corporation is legally allowed to issue. A corporation’s charter establishes the amount of shares the corporation may issue, and the board of directors can either issue the maximum amount or retain a portion of the shares. Corporations record capital stock in the equity section on their balance sheets. The amount of capital stock issuable by a company can be changed, but the process requires amending the corporate charter, usually involving difficult, expensive shareholder voting.
[Last updated in June of 2021 by the Wex Definitions Team]