Chapter 11 Flashcards
Retained earnings separately reported to inform stockholders of funding needs.
APPROPRIATED RETAINED EARNINGS
Total amount of stock that a corporation’s charter authorizes it to issue.
AUTHORIZED STOCK
Net income less any preferred dividends and then divided by weighted-average common shares outstanding.
BASIC EARNINGS PER SHARE
Recorded amount of equity applicable to common shares divided by the number of common shares outstanding.
BOOK VALUE PER COMMON SHARE
S/H Eq applicable to C/S / # of C/S outstanding
Equity applicable to preferred shares (equals its call price [or par value if it is not callable] plus any cumulative dividends in arrears) divided by the number of preferred shares outstanding.
BOOK VALUE PER PREFERRED SHARE
S/H Eq applicable to P/S / # of P/S outstanding
Amount that must be paid to call and retire a callable preferred stock or a callable bond.
CALL PRICE
Preferred stock that the issuing corporation, at its option, may retire by paying the call price plus any dividends in arrears.
CALLABLE PREFERRED STOCK
General term referring to a corporation’s stock used in obtaining capital (owner financing).
CAPITAL STOCK
Change in an accounting estimate that results from new information, subsequent developments, or improved judgment that impacts current and future periods.
CHANGE IN ACCOUNTING ESTIMATES
Corporation’s basic ownership share; also generically called CAPITAL STOCK.
COMMON STOCK
Capital structure that includes outstanding rights or options to purchase common stock, or securities that are convertible to common stock.
COMPLEX CAPITAL STRUCTURE
Preferred stock with an option to exchange it for common stock at a specified rate.
CONVERTIBLE PREFERRED STOCK
Business that is a separate legal entity under state or federal laws with owners called SHAREHOLDERS or STOCKHOLDERS.
CORPORATION
Preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid.
CUMULATIVE PREFERRED STOCK
Date the directors vote to pay a dividend.
DATE OF DECLARATION
Date the corporation makes the dividend payment.
DATE OF PAYMENT
Date directors specify for identifying stockholders to receive dividends.
DATE OF RECORD
Earnings per share calculation that requires dilutive securities be added to the denominator of the basic EPS calculation.
DILUTED EARNINGS PER SHARE
Securities having the potential to increase common shares outstanding; examples are options, rights, convertible bonds, and convertible preferred stock.
DILUTIVE SECURITIES
Difference between the par value of stock and its issue price when issued at a price below par value.
DISCOUNT ON STOCK
Unpaid dividend on cumulative preferred stock; must be paid before any regular dividends on preferred stock and before any dividends on common stock.
DIVIDEND IN ARREARS
Amount of income earned by each share of a company’s outstanding common stock; also called NET INCOME PER SHARE.
EARNINGS PER SHARE (EPS)
(net income - preferred dividends)/
weighted-average c/s outstanding
Earning a higher return on equity by paying dividends on preferred stock or interest on debt at a rate lower than the return earned with the assets from issuing preferred stock or debt; also called TRADING ON THE EQUITY.
FINANCIAL LEVERAGE
Stock dividend that is more that 25% of the previously outstanding shares.
LARGE STOCK DIVIDEND
Distribution of assets that returns part of the original investment to stockholders; deducted from contributed capital accounts.
LIQUIDATING CASH DIVIDEND
Price at which stock is bought or sold.
MARKET VALUE PER SHARE
Amount of assets defined by law that stockholders must (potentially) invest in a corporation; usually defined as par value of the stock; intended to protect creditors.
MINIMUM LEGAL CAPITAL
Preferred stock on which the right to receive dividends is lost for any period when dividends are not declared.
NONCUMULATIVE PREFERRED STOCK
Preferred stock on which dividends are limited to a maximum amount each year.
NONPARTICIPATING PREFERRED STOCK
Stock class that has not been assigned a par (or stated) value by the corporate charter.
NO-PAR VALUE STOCK
Costs such as legal fees and promoter fees to bring an entity into existence
ORGANIZATION EXPENSES
Total amount of cash and other assets received from stockholders in exchange for stock.
PAID-IN CAPITAL or CONTRIBUTED CAPITAL
Amount received from issuance of stock that is in excess of the stock’s par value.
PAID-IN CAPITAL IN EXCESS OF PAR VALUE
Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.
PARTICIPATING PREFERRED STOCK
Value assigned a share of stock by the corporate charter when the stock is authorized.
PAR VALUE
Class of stock assigned a par value by the corporate charter.
PAR VALUE STOCK
Stockholders’ right to maintain their proportionate interest in a corporation with any additional shares issued,
PREEMPTIVE RIGHT
Stock with a priority status over common stockholders in one or more ways, such as paying dividends or distributing assets.
PREFERRED STOCK
Difference between the par value of stock and its issue price when issued at a price above par.
PREMIUM ON STOCK or CONTRIBUTED CAPITAL IN EXCESS OF PAR VALUE
Ratio of a company’s current market value per share to its earnings per share; also called PRICE-TO-EARNINGS
PRICE-EARNINGS (PE) RATIO
market value per share / earnings per share
Correction of an error in a prior year that is reported in the statement of retained earnings (or statement of stockholders’ equity) net of any income tax effects.
PRIOR PERIOD ADJUSTMENTS
Legal document giving a stockholder’s agent the power to exercise the stockholder’s voting rights.
PROXY
Retained earnings not available for dividends because of legal or contractual limitations.
RESTRICTED RETAINED EARNINGS
Cumulative income less cumulative losses and dividends.
RETAINED EARNINGS
Debit (abnormal) balance in Retained Earnings; occurs when cumulative losses and dividends exceed cumulative income; also called ACCUMULATED DEFICIT
RETAINED EARNINGS DEFICIT
Occurs when a corporation calls in its stock and replaces each share with less than one new share; increases both market value per share and any par or stated value per share.
REVERSE STOCK SPLIT
Capital structure that consists of only common stock and nonconvertible preferred stock; consists of no dilutive securities.
SIMPLE CAPITAL STRUCTURE
Stock dividend that is 25% or less of a corporation’s previously outstanding shares.
SMALL STOCK DIVIDEND
No-par stock assigned a stated value per share; this amount is recorded in the stock account when the stock is issued.
STATED VALUE STOCK
Financial statement that lists the beginning and ending balances of each major equity account and describes all changes in those accounts.
STATEMENT OF STOCKHOLDERS’ EQUITY
Corporation’s distribution of its own stock to its stockholders without the receipt of any payment.
STOCK DIVIDEND
Rights to purchase common stock at a fixed price over a specified period of time.
STOCK OPTIONS
Occurs when a corporation calls in its stock and replaces each share with more than one new share; decreases both the market value per share and any par or stated value per share.
STOCK SPLIT
A corporation’s equity; also called SHAREHOLDERS’ EQUITY or CORPORATE CAPITAL.
STOCKHOLDERS’ EQUITY
Corporation’s own stock that it reacquired and still holds.
TREASURY STOCK
The annual amount of cash dividends distributed to common shares relative to their market value.
DIVIDEND YIELD
annual cash dividends per share / market value per share
