Chapter 7: Shareholder's equity Flashcards
Advantages of a corporation
- Separate legal entity
- Continuous lifetime and transferability of ownership
- Limited liability
Disadvantages of a corporation
- Corporate tax
- Government regulation
- Separation of ownership and management
4 rights of a shareholder
- voting rights
- dividends
- Liquidation rights
- right of pre-emption
additional paid in capital
difference between the face value and the price paid for the shares
authorised share capital
the number of shares a publicly traded company can issue
issued shares
amount of shares issued
outstanding shares
amount of shares issued or sold to the shareholders
treasury shares
amount of shares owned by the company
declaration date
the day the board of directors announces its intention to pay a dividend –> liability is created and recorded in the books
record date
shareholders will be paid the dividend –> a deadline to buy shares if you want to receive dividends
payment date
day on which the dividend will actually be paid
passing the dividend
when a company is not able to pay dividend –> with preference shares, dividends are paid out later
stock dividend
a dividend payment made in the form of additional shares –> may be used when a company does not have enough additional retained earnings to pay out cash dividends
stock split
company divides its existing shares into multiple shares to boost the liquidity of the shares
carrying amount
price a share is sold for at the market
