What do authorized shares represent in a company?

Authorized shares represent the total number of shares that a company is permitted to issue as specified in its corporate charter. This number is determined when the company is formed and can be adjusted through amendments to the charter, usually requiring shareholder approval.

Choosing the correct answer emphasizes that authorized shares indicate the maximum number of shares that a company can sell to raise capital. This total includes all shares that have been issued as well as those that may be available for future sale.

Understanding the distinctions among the other options clarifies the concept further. The total number of shares issued represents the actual shares that have been sold to investors and does not necessarily equal the number of authorized shares. Outstanding shares are those currently held by shareholders and do not encompass shares that are authorized but not yet sold. Finally, the number of shares owned by company executives pertains to a specific group and is a subset of outstanding shares, influenced by various factors including stock options and grants.