Final answer:
Outstanding shares include the total number of shares a company has sold to the public, minus the shares they have repurchased. These shares represent ownership of the company, and the company receives financial benefit only from the initial sale of stock in the IPO.
Step-by-step explanation:
The outstanding shares of a company include the shares that the company has sold to the public minus any shares that the company has bought back in the form of treasury shares. When a company conducts an Initial Public Offering (IPO), it sells stock to the public and receives financial capital from these sales. After the IPO, the ownership of the company is represented by the stock which is divided into shares. Those who buy the stock become the firm's owners or shareholders. Importantly, when shareholders sell stock to each other, the firm does not receive any funds from this exchange. Instead, the company's financial benefit comes only at the point of initial sale in the market, such as the IPO or any follow-up offerings.