Chapter 18: Shareholders' Equity Flashcards
paid-in capital
invested capital consisting primarily of amounts invested by shareholders when they purchase shares of stock from the corporation
retained earnings
amounts earned by the corporation on behalf of its shareholders and not (yet) distributed to them as dividends
comprehensive income
traditional net income plus other nonowner changes in equity
accumulated other comprehensive income (AOCI)
amount of other comprehensive income (nonowner changes in equity other than net income) accumulated over the current and prior periods
statement of shareholders’ equity
statement disclosing the source of changes in the shareholders’ equity accounts
S corporation
characteristics of both regular corporations and partnerships
limited liability company
owners are not liable for the debts of the business, except to the extent of their investment; all members can be involved with managing the business without losing liability protections; no limitations on the number of owners
limited liability partnership
similar to a limited liability company, except it doesn’t offer all the liability protection available in the limited liability company structure
Model Business Corporation Act
designed to serve as a guide to states in the development of their corporation statutes
articles of incorporation (corporate charter)
statement of the nature of the firm’s business activities, the shares to be issued, and the composition of the initial board of directors
board of directors
establishes corporate policies and appoints officers who manage the corporation
preferred shares
typically has a preference
a) to a specified amount of dividends (stated dollar amount per share or percentage of par value per share), and
b) to distribution of assets in the event the corporation is dissolved
right of conversion
shareholders’ right to exchange shares of preferred stock for common stock at specified conversion ratio
redemption privilege
might allow preferred shareholders’ the option, under specified conditions, to return their shares for a predetermined redemption price
cumulative vs nonculumative
if a specified dividend is not paid for a given year, the unpaid dividends accumulate and must be made up in a later dividend year before any dividends are paid on common shares
participating vs nonparticipating
preferred shareholders are allowed to receive additional dividends beyond the stated amount
retired stock
shares repurchased and not designated as treasury stock
treasury stock
shares repurchased and not retired
deficit
debit balance in retained earnings
dividend
distribution to shareholders of a portion of assets earned
liquidating dividend
when a dividend exceeds the balance in retained earnings
date of record
specific date stated as to when the determination will be made of the recipient of the divident
ex-dividend date
date usually two business days before the date of the record and is the first day the stock trades without the right to receive the declared dividend
property dividend
when a noncash asset is distributed
stock dividend
distribution of additional shares of stock to current shareholders of the corporation
stock split (large stock dividend)
stock distribution of 25% or higher
reverse stock split
when a company decreases, rather than increases, its outstanding shares
quasi reorganization
a firm undergoing financial difficulties, but with favorable future prospects, may use a quasi reorganization to write down inflated asset values and eliminate an accumulated deficit
