chapter 13 Flashcards
corporation
is a business organized under state law that is a separate legal entity
unique characteristic of corporation
- separate legal entity
- number of owners
- no personal liability of the owners
- lack of mutual agency
- indefinite life
- taxation
- capital accumulation
authorized stock
the maximum number of shares of stock a corporation may issue
issued stock
share of stock that have been issued by the corporation
outstanding stock
stock held by the stockholders
treasury stock
stock that was previously issued and later reacquired by the company (issued but not outstanding)
stockholder’s 4 basic rights
- vote: each share of basic ownership in the corporation
- dividends: stockholders receive a proportionate part of any dividend declared and paid.
- liquidation: stockholders receive their proportionate share of any assets remaining after liquidation
- preemptive right: stockholders have a right to maintain their proportional ownership.
different classes of stock
common and preferred
common stock
represents the basic ownership of a corporation
preferred stock
gives its owners certain advantages over common stock.
par value
is an amount assigned by a company to a share of its stock.Most companies set par value low to avoid issuing their stock below par. The par value of a stock has no relation to the market value which is the price at which the stock is bought and sold.
stated value
no-par stock that has been assigned an amount similar to par value
stockholder’s equity
a corporation’s equity that includes paid-in capital and retained earnings
paid-in capital
represents amounts received from the stockholders of a corporation in exchange for stock
retained earnings
equity earned by profitable operations of a corporation that is not distributed to stockholders
underwriter
a company can sell its stock directly to stockholders by using the services of them
issue price
is the amount a corporation receives from issuing stock
legal capital
refers to the portion of stockholder’s equity that cannot be used for dividends
three dividend dates
declaration date-the board of directors announces the intention to pay the dividend and a liability is created
date of record
this the date the corporation records the stockholders that will receive dividend checks
payment date
this the date the dividend is paid to the stockholders
stock dividend
is a distribution of a corporations own stock to its shareholders
- they affect only stockholder’s equity
- they have no effect on total’s stockholder’s equity
- they have no effect on assets or liabilties
stock split
- increases the number of issued and outstanding shares of stock
- decrease the par value and the market value per share proportionately
earnings per share
reports the amount of net income (loss) for each share of the company’s outstanding common stock
(net income-preferred dividends)/average number of common shares outstanding
