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exam 3 Flashcards

1
Q

3 components of SE

A
  • capital
  • retained earning
  • common stock
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2
Q

paid-in capital (invested capital)

A

amount of money paid into a company by owner

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3
Q

Retained earning

A

revenue that has not been distributed

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4
Q

common stock

A

Shares of ownership in a corporation

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5
Q

corporation

A

business legally separated from its owner

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6
Q

article of incorporation

A

a. nature of the firms activities
b. shares of stock to be issued
c. initial board of directors

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7
Q

board of director

A

Establish corporates policies n appoint officers who manage corporate

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8
Q

organization chart

A

Trace the line of authority for a typical corporation

  1. stockholders (control the company)
  2. board of directors
  3. chief executive officer (CEO)
  4. executive vice president and digital & engineering | chief operating officers (COO) | chief financial officers (CFO) | legal counsel | executive vice president and sales & marketing
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9
Q

S corporation

A

…
- doesn’t pay double taxations

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10
Q

Equity Financing Stage 1

A

investment by founder of business

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11
Q

Equity Financing Stage 2

A

investment by family n friend

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12
Q

Equity Financing Stage 3

A

investment by “angel” investors & venture capital firms

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13
Q

angel investors

A

wealthy investors who is willing to risk investment funds on a promising business

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14
Q

venture capital firms

A

provide additional financing for a percentage ownership in the company

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15
Q

Equity Financing Stage 4

A

initial public offering

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16
Q

initial public offering

A

first time a corporation issues stock to the public
- most corp doesn’t go public until their equity financing exceed 20 mil

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17
Q

publicly held corporation

A

allow investment by the general public & is regulated by the SEC

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18
Q

privately held corporation

A

does not allow investment by general public and normally has fewer stockholder
- doesn’t need to file financial statement w SEC

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19
Q

stockholder rights

A
  1. right to vote
    - stockholder vote on matters (election of directors)
  2. right to receive dividends
    - stockholder shares profits
  3. rights to share in distribution of assets
    - shares distribution of asset if company is dissolved
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20
Q

limited liability
(corporation advantage)

A

owners are not personally responsible for company if it goes bankrupt

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21
Q

corporation advantage

A
  • easy to transfer ownership
  • easily attracts investment (raise capital)
  • limited liability
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22
Q

double taxation
(corporation disadvantage)

A

corporate is taxed at corporate level n again on dividends at individual level

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23
Q

corporation disadvantage

A
  • more paper work
  • double taxation
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24
Q

authorized stock

A

shares available to sell (issued + unissued)

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25
issued stock
shares that has been sold that is owned by the company or investors (outstanding + treasury)
26
outstanding stock
shares owned by investors
27
treasury stock
shared issued n repurchased by the company
28
par value
legal capital per share of stock that assigned when corporation is first established
29
no-par value stock
common stock that has not been assigned a par value
30
stated value
legal capital assigned per share to no-par stock
31
additional paid-in capital
portion of cash proceeds from issuing stock above par value
32
preferred stock
stock w preference over common stock in the patent of dividends n distribution of asset
33
convertible (features of preferred stock)
shares can be converted into common stock
34
redeemable (features of preferred stock)
shares can be returned to or redeemed by corporation at fixed price
35
cumulative (features of preferred stock)
shares received priority for future dividends, if dividends are not declared in a given year
36
dividends in arrears
unpaid dividends on cumulative preferred stock
37
treasury stock
name given to a company's own issued stock that it has purchased -reported in balance sheet - countra account of SE
38
accumulated deficit
negative balance in RE
39
dividends
distribution to stockholders
40
declared date
date on board of directors announced the next dividends to be paid - create binding legal obligation for company declaring dividends - ↑ dividend expense ↑ liability
41
record date
date company looks at its records to determine who stockholder of company are
42
payment date
date of distribution - dividends are paid only on shares outstanding
43
stock dividends
additional shares company stock given to stockholder
44
stock split
large stock dividend that includes a reduction in par or stated value per share
45
statement of stockholder equity
Summarize the change in SE OVERTIME
46
stockholder equity
balance of each equity account at a POINT IN TIME
47
statement of cash flow
summary of cash inflow n outflow during reporting period - inflow = cash received - outflow = cash paid
48
net cash flow
cash inflow - outflow
49
operating activities
transactions involving revenue n expense activities
50
investing activities
transactions involving the purchase n sale of long-term asset and current investment
51
capital expenditure (CAPEX)
investment in capital asset (replace/expand building, land, equipment)
52
financing activities
transaction w lenders
53
total net cash flow
beg bal of cash +/- net cash flow
54
noncash activities
significant investing n financing activities that do not affect cash
55
indirect method
begin w net income, then list adjustment to net income to find operating cash flow
56
direct method
adjust items in income statement to directly show cash inflow n outflow from operation - must also report indirect method
57
cash return on assets
measures operating cash flow generated per dollar of asset
58
internal financing
profits generated by the company
59
external financing
fund coming from outside of the company (liability n SE)
60
debt financing (liability)
borrowing money from creditors
61
equity financing (SE)
obtaining investment from stockholders
62
capital structure
mixture of liabilities n SE a business uses
63
tax-deductible
interest expense incurred when borrowing money
64
not tax-deductible
dividends paid to SE
65
installment note
Loan requiring payment of interest and principle
66
amortization schedule
provide table format detailing the cash payment each period
67
carrying value
amount that a liability is reported in balance sheet
68
lease
Contractual arrangement to the right to use an asset for specific period of time
69
bond
formal debt instrument issued by a company to borrow money - issuing company (borrower) receives cash by selling bond to investor (lender)
70
principle or face amount
stated amount at specific maturity date
71
stated interest rate
rate specific in the bond contact used to calculated the cash payment for interest
72
private placement
sale of debt securities directly to a single investor
73
secure bond (bond characteristic)
supported by collateral
74
unsecured bond (bond characteristic)
not supported by collateral
75
term bonds (bond characteristic)
matures on a single date
76
serial bonds (bond characteristic)
matures in installment
77
callable bond (bond characteristic)
issuing company can pay off bonds early
78
convertible bond (bond characteristic)
invertor can convert bonds to common stock
79
market interest rate
cheat sheet
80
default risk
possibility that company will be unable to pay bond face amount n interest - increase default risk (increase rate of return over life of bond by paying lower price @ issued date
81
discount
bond issue price < face amount - carrying value n corresponding interest expense INCREASE over time - contra liability (deducted from bond payable)
82
premium
bond issue price > face amount - carrying value n corresponding interest expense DECREASE over time
83
early extinguishment of debt
issuing company retire debt before it scheduled maturity date

acct (3 decks)

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