Exam 1 Flashcards
The amount of stock that a corporation is authorized to sell as indicated in its charter.
Authorized Stock
A document that is issued by the state to set forth important terms and features regarding the creation of a corporation.
Charter
A business organized as a legal entity separate and distinct from its owners under state corporation law.
Corporation
Capital stock that has not been assigned a value in the corporate charter.
No-par value stock
Costs incurred in the formation of a corporation
Organization costs
Capital stock that has been issued and is being held by stockholders
Outstanding stock
Total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
Paid-in capital
Capital stock that has been assigned a value per share in the corporate charter.
Par value stock
Capital stock that has some preferences over common stock.
Preferred stock
A corporation that has only a few stockholders and whose stock is not available for sale to the general public.
Privately held corporation
A corporation that may have thousands of stockholders and whose stock is regularly traded on a national securities exchange.
Publicly held corporation
Net income that the corporation retains for future use.
Retained earnings
The amout per share assigned by the board of directors to no-par value stock
Stated value
A corporation’s own stock that has been issued and subsequently reacquired from shareholders by the corporation but not retired.
Treasury stock
The equity a common stockholder has in the net assets of the corporation from owning one share of stock.
Book value per share
A pro rata distribution of cash to stockholders
Cash dividend
A feature of preferred stock entitling the stockholder to receive current-year and any unpaid prior-year dividends before common stockholders are paid dividends.
Cumulative dividend
The date the board of directors formally declares (authorizes) a dividend and announces it to stockholders.
Declaration date
A debit balance in retained earnings.
Deficit
A corporation’s distribution of cash or stock to its stockholders on a pro rata (proportional) basis.
Dividend
The net income earned by each share of outstanding common stock.
Earnings per share (EPS)
A dividend declared out of paid-in-capital.
Liquidating dividend
The date dividends are transferred to stockholders.
Payment date
The percentage of earnings a company distributes in the form of cash dividends to common stockholders and is computed as cash dividends declared on common stock divided by net income.
Payout ratio
The correction of an error in previously issued financial statements.
Prior period adjustment.
The date when ownership of outstanding shares is determined for dividend purposes.
Record date
Net income that a company retains in the business.
Retained earnings
Circumstances that make a portion of retained earnings currently unavailable for dividends.
Retained earnings restrictions
A statement that shows the changes in retained earnings during the year.
Retained earnings statement.
A measure of profitabiity that shows how many dollars of net income were earned for each dollar invested by the owners; computed as net income minus preferred dividends divided by average common stockholders’ equity.
Return on common stockholders’ equity
A pro rata distribution to stockholders of hte corporation’s stock.
Stock dividend
A statement that shows the changes in each stokholders’ equity account and in total stockholders’ equity during the year.
Stockholders’ equity statement
The issuance of additional shares of stock to stockholders according to their percentage ownership. It is accompanied by a reduction in the par or stated value per share.
Stock split
A legal document thta indicates the name of the issuer, the face value of the bonds, the contractual interest rate, and maturity date of the bonds.
Bond Certificate
A legal document that sets forth the terms of the bond issue.
Bond indenture
A form of interest-bearning notes payable issued by corporations, universities, and governmental entities.
Bonds
Bonds that are subject to redemption (buy back) at a stated dollar amount prior to maturity at the option of the issuer.
Callable bonds
Rate used to determine the amount of cash interest the borrower pays and the investor receives.
Contractual interest rate
Bonds that permit bondholders to convert them into common stock at the bondholders’ option.
Convertible bonds
Bonds issued against the general credit of the borrower. Also called unsecured bonds.
Debenture bonds
A solvency measure that indicates the percentage of total assets provided by creditors; computed as total liabilities divided by total assets.
Debt to asset ratio
The difference between the face value of a bond and its selling price, when the bond is sold for less than its face value.
Discount (on a bond)
Amortization of bond discount or bond premium which results in periodic interest expense equal to a constant percentage of the carrying value of the bonds
Effective-interest method of amortization
Rate established when bonds are issued that maintains a constant value for interest expense as a percentage of bond carrying value in each interest period.
Effective-interest rate
Amount of principal due at the maturity date of the bond.
Face value
Obligations expected to e paid more than one year in the future.
Long-term liabilities
The rate investors demand for loaning funds to the corporation.
Market interest rate
The date on which the final payment on the bond is due from the bond issuer to the investor.
Maturity date
A bond secured by real estate.
Mortgage bond
A long-term note secured by a mortgage that pledges title to specific assets as security for a loan.
Mortgage notes payable
The difference between the selling price and the face alue of a bond, when the bond is sold for more than its face value.
Premium (on a bond)
Bonds that have specific assets of the issuer pledged as collateral.
Secured bonds
Bonds secured by specific assets set aside to redeem them.
Sinking fund bonds
Allocates the same amount to interest expense in each interest period.
Straight-line method of amortization
A solvency measure that indicates a company’s ability to meet interest payments; computed by dividing the sum of net income, interest expense, and income tax expense by interest expense.
Times interest earned
The relationship between time and money. A dollar received today is worth more than a dollar promised at some time in the future.
Time value of money
Bonds issued against the general credit of the borrower. Also called debenture bonds.
Unsecured bonds.
