Accounting 2

Retained earnings are:

decreased by dividends. increased by net income. all of the company's earnings not distributed to stockholders. sometimes called earned capital.

A corporate charter:

describes the business activities. names the board of directors. specifies the shares of stock to be issued.

Authorized stock

describes the business activities. names the board of directors. specifies the shares of stock to be issued.

Liquidity

refers to having sufficient cash (or other assets readily convertible into cash) to pay its current liabilities.

Par Value

the legal capital per share of stock that's assigned when the corporation is first established

Solvency

refers to a company's ability to pay all its liabilities, which includes long-term liabilities as well.

A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?

Articles of incorporation Corporate charter

The rights of common stockholders

Right to distribution of assets in liquidation. Right to vote for corporate directors. Right to dividends when declared.

Invested Capital

is the amount of money paid into a company by its owners.