Podcast Beta
Questions and Answers
Lower Risk for Creditors: If a company has more equity, it's less risky for ______. This means they'll charge lower interest rates on loans.
lenders
Authorized Stock: This is the maximum number of shares a company can sell to ______.
investors
Issued Stock: This is the amount of authorized stock that has been sold to ______ and paid for, either with cash, property, or services.
investors
Reacquired Stock: These are shares that the company buys back from ______, either as a gift or by purchasing them back.
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Outstanding Stock: This is the portion of issued stock that is still held by ______ and hasn't been bought back by the company.
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Common Stock: Represents the basic issue of shares with the following rights: Voting rights: Shareholders elect directors who hire ______.
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Cumulative voting: Shareholders may cast all votes for one member of the ______.
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Proxy voting: Shareholders grant authority to another individual to vote their ______.
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Preferred Stock: A class of stock with preferences over common shares, including: No voting rights: the right to elect is taken away for this class of ______.
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Right to share in profits and dividends as residual claimants after preferred ______.
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Study Notes
Sole Proprietorship
- Owner's equity is represented as Alpha, Capital.
- The capital of a sole proprietorship is affected by net income and drawings.
- The formula for owner's equity is: Capital + Net Income - Drawings = Total Owner's Equity.
Partnership
- Partners' equity represents the ownership interest of partners in a partnership.
- The total partners' equity is the sum of individual partner's equity.
Corporation
- Shareholders' equity represents the ownership interest of shareholders in a corporation.
- Contributed capital is the amount of money shareholders invest in the corporation.
- Retained earnings are profits reinvested in the business.
- Total stockholders' equity is the sum of contributed capital and retained earnings.
Characteristics of Corporation
- No obligation for dividends: companies are not required to pay dividends to shareholders.
- No maturity date: shares do not have to be paid back like loans do.
Types of Corporations
- Parent corporation: a company that owns more than half of another company.
- Subsidiary corporation: a company owned and controlled by another company.
- Domestic corporation: a company created under the laws of the Philippines.
- Foreign corporation: a company formed under laws from a country other than the Philippines.
- Close corporation: a company limited to selected people or family members.
- Open corporation: a company open to anyone who wants to become a shareholder.
Proportionate Interest
- Proportionate interest is the percentage of shares owned by a shareholder.
- The formula for proportionate interest is: (Shares Owned ÷ Shares Outstanding).
Dividends
- Dividends are payments made to shareholders.
- Dividends may be classified as cash dividends, which are paid out to shareholders.
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Description
Test your knowledge of accounting terms and concepts with this quiz. Topics covered include sole proprietorship, partnership, and corporation owner's equity. Practice calculating total owner's equity for different business structures.
