Chapter 13

Question 1

Total amount of stock that a corporation’s charter authorizes it to issue.

Answer 1

Authorized stock

Question 2

Net income less any preferred dividends and then divided by weighted-average common shares outstanding.

Answer 2

Basic earnings per share

Question 3

Preferred stock in which the issuer has the right to call in or redeem the stock at a preset price after a defined date.

Answer 3

Callable Preferred Stock

Question 4

Corporation’s basic ownership share; also generically called capital stock.

Answer 4

Common stock

Question 5

Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually any time after a predetermined date.

Answer 5

Convertible Preferred Stock

Question 6

Preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid.

Answer 6

Cumulative preferred stock

Question 7

Date the directors vote to pay a dividend.

Answer 7

Date of declaration

Question 8

Date the corporation makes the dividend payment.

Answer 8

Date of payment

Question 9

Date the directors specify for identifying stockholders to receive dividends.

Answer 9

Date of record

Question 10

Unpaid dividend on cumulative preferred stock; must be paid before any regular dividends on preferred stock and before any dividends on common stock.

Answer 10

Dividend in arrears

Question 11

Ratio of the annual amount of cash dividends distributed to common shareholders relative to the common stock’s market value (price).

Answer 11

Dividend yield

Question 12

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.

Answer 12

Financial leverage

Question 13

Stock dividend that is more than 25% of the previously outstanding shares.

Answer 13

Large stock dividend

Question 14

Price at which stock is bought or sold.

Answer 14

Market value per share

Question 15

Preferred stock on which the right to receive dividends is lost for any period when dividends are not declared.

Answer 15

Noncumulative preferred stock

Question 16

Preferred stock on which dividends are limited to a maximum amount each year.

Answer 16

Nonparticipating preferred stock

Question 17

Preferred stock that shares with common stockholders any dividends paid in excess of the percent stated on preferred stock.

Answer 17

Participating preferred stock

Question 18

Stockholders’ right to maintain their proportionate interest in a corporation with any additional shares issued.

Answer 18

Preemptive right

Question 19

Ratio of a company’s current market value per share to its earnings per share; also called price-to-earnings.

Answer 19

Price-earnings (PE) ratio

Question 20

Legal document giving a stockholder’s agent the power to exercise the stockholder’s voting rights.

Answer 20

Proxy

Question 21

Cumulative income less cumulative losses and dividends.

Answer 21

Retained earnings

Question 22

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.

Answer 22

Reverse stock split

Question 23

Stock dividend that is 25% or less of a corporation’s previously outstanding shares.

Answer 23

Small stock dividend

Question 24

Corporation’s distribution of its own stock to its stockholders without the receipt of any payment.

Answer 24

Stock dividend

Question 25

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.

Answer 25

Stock split

Question 26

Corporation’s own stock that it reacquired and still holds.

Answer 26

Treasury stock