Chapter 13 Flashcards
Corporation
Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders
Organization Expenses
Costs such as legal fees and promoter fees to bring an entity into existence.
Proxy
Legal document giving a stockholder’s agent the power to exercise the stockholder’s voting rights
Common Stock
or Capital Stock
Corporations basic ownership share
Preemptive Right
Stockholder’s right to maintain their proportionate interest in a corporation with any additional shares issued.
Capital Stock
General term referring to a corporation’s stock used in obtaining capital, (owner financing).
Authorized Stock
Total amount of stock that a corporation’s charter authorizes it to issue
Market Value Per Share
Price at which stock is bought or sold.
Par Value Stock
Class of stock assigned a par value by the corporate charter.
Par Value
Value assigned a share of stock by the corporate charter when the stock is authorized.
Minimum Legal Capital
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.
No-Par Value Stock
Stock class that has not been assigned a par (or stated) value by the corporate charter.
Stated Value Stock
No-par stock assigned a stated value per share; this is recorded in the stock account when the stock is issued.
Stockholder’s Equity
or Corporate Capital
A corporation’s equity
Retained Earnings
Cumulative income less cumulative losses and dividends
Paid-In Capital In Excess of Par Value
Amount received from issuance of stock that is in excess of the stock’s par value.
Discount on Stock
Difference between the par value of stock and it’s issuance when issued at a price below par value.
Date of Declaration
Date the directors vote to pay a dividend.
Date of Record
Date the directors specify for identifying stockholders to receive dividends.
Date of Payment
Date the corporation makes the dividend payment.
Retained Earnings Deficit
or Accumulated Deficit
Debit (abnormal) balance in Retained Earnings; occurs when cumulative losses and dividends exceed cumulative income.
Liquidating Cash Dividend
Distribution of assets that returns part of the original investment to stockholders; deducted from contributed capital accounts.
Stock Dividend
Corporation’s distribution of it’s own stock to it’s stockholders without the receipt of any payment.
Small Stock Dividend
Stock dividend that is 25% or less of a corporation’s previously outstanding shares.
Large Stock Dividend
Stock dividend that is more than 25% of the previously outstanding shares.
Stock Split
Occurs when a corporation calls in it’s stock and replaces each share with more than one new share; decreases both the market value per share and the par or stated value per share.
Reverse Stock Split
Occurs when a corporation call in it’s stock and replaces each share with less than one new share; increases both the market value per share and the par or stated value per share.
Preferred Stock
Stock with a priority status over common stockholders in one or more ways, such as paying dividends or distributing assets.
Cumulative Preferred Stock
Preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid
Dividend in Arrears
Unpaid dividend on cumulative preferred stock; must be paid before any regular dividends on preferred stock and before any dividends on common stock.
Noncumulative Preferred Stock
Preferred stock on which the right to receive dividends is lost for any period when dividends are not declared.
Nonparticipating Preferred Stock
Preferred stock on which dividends are limited to a maximum amount each year.
Participating Preferred Stock
Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.
Convertible Preferred Stock
Preferred stock with an option to exchange it for common stock at a specified rate.
Callable Preferred Stock
Preferred stock that the issuing corporation, at it’s option, may retire by paying the call price plus any dividends in arrears.
Call Price
Amount that must be paid to call and retire a callable preferred stock or a callable bond.
Financial Leverage
or Trading on the Equity
Earning a higher return on equity by paying dividends on preferred stock or interest on a debt at a rate lower than the return earned with the assets from issuing preferred stock or debt
Treasury Stock
Corporation’s own stock that it reacquired and still holds
Restricted Retained Earnings
Retained Earnings not available for dividends because of legal or contractual limitations.
Appropriated Retained Earnings
Retained earnings separately reported to inform stockholders of funding needs.
Prior Period Adjustments
Correction of an error in a prior year that is reported in the Statement of Retained Earnings (or Statement of Stockholder’s Equity) net of any income tax effects.
Changes in Accounting Estimates
Change in an accounting estimate that results from new information, subsequent developments, or improved judgement that impacts current and future periods.
Statement of Stockholder’s Equity
Financial statement that lists the beginning and ending balances of each major equity account and describes all the changes in those accounts.
Stock Options
Rights to purchase common stock at a fixed price over a specified period of time.
Earnings Per Share
or Net Income Per Share
Amount of income earned by each share of a company’s outstanding common stock
