Corporations Flashcards
What is a shareholder?
Owners of a corporation.
What is a share?
A unit of ownership in a corporation.
What is share capital, or capital stock?
A general term for all types or classes of shares.
How does a privately held corporation sell its shares?
It doesn’t offer its shares for public sale and usually has few shareholders.
How does a publicly held corporation sell its shares?
It offers its shares for public sale and can have thousands of shareholders.
What does public sale refer to?
Trading in an organized stock market.
What does progressive tax mean?
Higher income levels are taxed at higher rates, lower income levels are taxed at lower rates.
What are authorized shares?
The total number of shares allowed to be sold.
What are organization costs?
The costs of organizing a corporation.
What is a proxy?
A document signed by a shareholder to delegate voting rights to an agent.
What is a charter?
It authorizes the number and types/classes of shares to be issued.
What is equity financing?
The selling or issuing of shares. Assets are increased (financed) through shareholder (equity) investment.
How does a corporation sell their shares directly?
They advertise directly to potential buyers, which is most common with privately held corporations
How does a corporation sell their shares indirectly?
They pay a brokerage house (investment banker) to issue its shares
Market value per share
The price at which a share is bought or sold.
What are dividends?
Sharing profit with the shareholders of the company.
What is the date of declaration?
The date the directors vote to pay a dividend, which creates a legal liability.
What is the date of record?
The future date specified by directors for identifying those shareholders to receive dividends.
What is the date of payment?
The date when shareholders receive payment.
Dividend preference
Dividends must be paid first to preferred shareholders, then to common shareholders.
Cumulative preferred shares
Have the right to be paid current and all prior periods’ undeclared dividends before dividends are paid to common shareholders.
Dividend in arrears
Unpaid dividends.
Non-cumulative shares
Have no right to prior periods’ unpaid, undeclared dividends.
Retained earnings
Income to date that has been kept for the purpose of reinvestment.
