Questions and Answers
What is a corporation?
A legal entity created under the laws of a state or the federal government.
What are articles of incorporation?
A document prepared by the founders of a corporation that sets forth the structure and purpose of the corporation.
What is par value?
An amount specified in the corporate charter for each class of stock imprinted on stock certificates.
No-par value stock has a specified par value.
Signup and view all the answers
What is stated value?
Signup and view all the answers
What are authorized shares?
Signup and view all the answers
What are issued shares?
Signup and view all the answers
What are outstanding shares?
Signup and view all the answers
What is common stock?
Signup and view all the answers
What is the preemptive right?
Signup and view all the answers
What is preferred stock?
Signup and view all the answers
What does cumulative mean in relation to preferred stock?
Signup and view all the answers
What does convertible mean in relation to preferred stock?
Signup and view all the answers
What does participating mean in relation to preferred stock?
Signup and view all the answers
What does callable mean in relation to preferred stock?
Signup and view all the answers
What is paid-in capital?
Signup and view all the answers
What are retained earnings?
Signup and view all the answers
What is a forward stock split?
Signup and view all the answers
What is treasury stock?
Signup and view all the answers
What are dividends?
Signup and view all the answers
What are stock dividends?
Signup and view all the answers
What is a statement of retained earnings?
Signup and view all the answers
What is a statement of stockholders' equity?
Signup and view all the answers
Study Notes
Stockholders' Equity Concepts
- Corporation: A legal entity established under state or federal law, with ownership evidenced by shares of stock.
- Articles of Incorporation: Founders' document outlining the corporation's purpose, structure, and capital stock specifics.
- Par Value: The nominal value assigned to each share in the corporate charter, influencing the company's legal capital.
- No-Par Value Stock: Shares that do not have a designated par value.
- Stated Value: A nominal amount assigned to no-par value stock, treated similarly to par value for accounting.
Shares and Ownership
- Authorized Shares: Maximum shares a corporation is permitted to issue for each stock class.
- Issued Shares: Shares sold to stockholders, which can be outstanding or held in treasury.
- Outstanding Shares: Shares actively held by stockholders.
Types of Stock
- Common Stock: Basic stock class granting voting rights, dividends, and liquidation benefits after senior claims.
- Preferred Stock: Prioritized stock type for dividends and asset distribution upon liquidation, holding rights over common stock.
- Cumulative Preferred Stock: Type of preferred stock requiring payment of missed dividends before common stock dividends.
- Convertible Preferred Stock: Preferred stock that can be exchanged for common stock at a predetermined rate.
- Participating Preferred Stock: Type of preferred stock allowing for additional dividends beyond regular payments.
- Callable Preferred Stock: Allows the issuing corporation to redeem preferred stock at a specified price.
Capital and Earnings
- Paid-in Capital: Contributions from stockholders exceeding par or stated value of shares.
- Retained Earnings: Profits not distributed as dividends, reinvested for corporate growth.
Stock Management
- Forward Stock Split: Issuing additional shares to existing shareholders, increasing shares outstanding while reducing par value.
- Treasury Stock: Shares repurchased by the corporation that are held, not canceled, reducing stockholders' equity on the balance sheet.
Distributions and Statements
- Dividends: Allocations of cash or stock to stockholders from corporate earnings.
- Stock Dividends: Issuing additional shares proportional to current ownership without cash distribution.
- Statement of Retained Earnings: Financial statement detailing changes in retained earnings over an accounting period.
- Statement of Stockholders' Equity: Financial statement summarizing changes in equity, including beginning balance, additions, deductions, and ending balance during a specific period.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz covers key concepts from Chapter 11 on Stockholders' Equity. It focuses on important terms such as 'corporation' and 'articles of incorporation', providing essential definitions to enhance your understanding in finance. Perfect for students looking to reinforce their knowledge in this area.