Chapter 13 Flashcards
A business organized under state
law that is a separate legal entity
Corporation
Name 4 advantages of a corporation
- They raise more money
- Has continuous life
- The transfer of corporate ownership is easy
- Limited liability for owners
Name 4 disadvantages of corporations
- Ownership and management are separate
- The earning of a corporation may be subject to double taxation
- Government regulation is expensive
- Start-up costs are higher than other business forms
The maximum number of shares
of stock that the corporate charter
allows the corporation to issue.
Authorized Stock
Stock that has been issued but may
or may not be held by stockholders.
Issued Stock
Paper evidence of ownership in a
corporation.
Stock Certificate
Represents the individual’s
ownership of the corporation’s
capital.
Capital Stock
Issued stock in the hands of
stockholders
Outstanding Stock
Stockholder’s right to maintain their
proportionate ownership in the
corporation.
Preemptive Right
4 stock holder rights
- Vote
- Dividends
- Liquidation
- Preemptive right
is an amount assigned by a company to a share of its stock. Has no relation to the market value, which is the price at which the stock is bought and sold
Par value
No-par stock that has been assigned
an amount similar to par value.
Stated Value Stock
A corporation’s equity that includes
paid-in capital and retained earning
Stockholders’ Equity
Represents amounts received from
the stockholders of a corporation in
exchange for stock.
Paid-in-capital
Equity earned by profitable
operations of a corporation that is
not distributed to stockholders.
Retained Earnings
The amount that the corporation
receives from issuing stock.
Issue Price
Represents amounts received from
stockholders in excess of par value
Paid-in Capital in excess of par
The portion of stockholders’ equity
that cannot be used for dividends.
Legal Dividends
A preferred stock dividend is in
arrears if the dividend has not been
paid for the year and the preferred
stock is cumulative
Dividend in Arrears
Preferred stock whose owners must
receive all dividends in arrears plus
the current year dividend before the
corporation pays dividends to the
common stockholders.
Cumulative preferred Stock
Preferred stock whose owners do
not receive passed dividends.
Noncumulative preferred stock
A distribution by a corporation of its
own stock to its stockholders.
Stock dividends
Amount of a company’s net
income (loss) for each share of its
outstanding common stock. (Net
incomePreferreddividends)/ −
Weightedaveragenumberof
common shares outstanding.
Earnings per share
Restriction of a portion of retained
earnings that is recorded by a
journal entry.
appropriations of retained earnings
How is EPS calculated
net income - preferred dividends / weighted average number of common shares outstanding
is the ratio of the market price of a share of common stock to the company’s earnings per share.
price/earnings ratio
= market price of common stock/EPS
