Definition:

Shares Outstanding (Basic Average) refers to the average number of shares that are outstanding during a specific period, typically a fiscal quarter or year. It is used to calculate metrics like earnings per share (EPS).

Formula:

Basic Average Shares Outstanding = (Shares Outstanding at Beginning of Period + Shares Outstanding at End of Period) / 2

How to use the metric:

This metric is used to determine the earnings per share (EPS) by dividing the company's net income by the basic average shares outstanding. It helps investors understand the portion of a company's profit allocated to each share of common stock.

Limitations:

The basic average shares outstanding does not account for potential dilution from convertible securities, options, or warrants. Therefore, it may not fully reflect the potential impact on earnings per share if these instruments are exercised.

Applies to:

This metric is applicable across all industries as it is a fundamental measure used in financial analysis to assess company performance and valuation.

Doesn't apply to:

There are no specific industries where this metric does not apply, but it may be less relevant for companies with complex capital structures involving significant convertible securities or stock options, as it does not account for dilution.

Summary:

Shares Outstanding (Basic Average) is a key metric used to calculate earnings per share, providing insight into a company's profitability on a per-share basis. While widely applicable, it does not account for potential dilution, which can be a limitation in assessing a company's financial health.