Accounting 225 - Chapter 10
Double taxation
a corporation pays income taxes on its earnings, and when dividends are distributed to stockholders, the stockholders pay taxes a second time on the corporate dividends they receive
Treasury stock
a corporation's own stock that it has reacquired
Accumulated deficit
a debit balance in Retained Earnings
Stock split
a large stock dividend that includes a reduction in the par or stated value per share
Record date
a specific date on which the company will determine the registered owners of stock and, therefore, who will receive the dividend
Stock dividends
additional shares of a company's own stock given to stockholders
S corporation
allows a company to enjoy limited liability as a corporation, but tax treatment as a partnership
Publicly held corporation
allows investment by the general public and is regulated by the Securities and Exchange Commission
No-par value stock
common stock that has not been assigned a par value
Articles of incorporation
describes the nature of the firm's business activities, the shares to be issued, and the composition of the initial board of directors
Dividends
distributions by a corporation to its stockholders
Privately held corporation
does not allow investment by the general public and normally has fewer stockholders
Earnings per share
measures the net income earned per share of common stock
Return on equity
net income divided by average stockholder's equity; measures the income generated per dollar of equity
Return on the market value of equity
net income divided by the market value of equity
Venture capital firms
provide additional financing, often in the millions, for a percentage ownership in the company
Retained earnings
represents all net income, less all dividends, since the company began
Convertible
shares can be exchanged for common stock
Redeemable
shares can be returned to the corporation at a fixed price
Cumulative
shares receive priority for future dividends, if dividends are not paid in a given year
Preferred stock
stock with preference over common stock in the payment of dividends and the distribution of assets
Limited liability
stockholders in a corporation can lose no more than the amount they invested in the company
Growth stocks
stocks that tend to have higher price-earnings ratios and are expected to have higher future earnings
Value stocks
stocks that tend to have lower price-earnings ratios and are priced low in relation to current earnings
Statement of stockholder's equity
summarizes the changes in the balance in each stockholder's equity account over a period of time
Paid-in capital
the amount stockholders have invested in the company
Payment date
the date of the actual cash distribution of dividends
Declaration date
the day on which the board of directors declares the cash dividend to be paid
Property dividend
the distribution of a noncash asset to stockholders
Initial public offering
the first time a corporation issues stock to the public
Par value
the legal capital assigned per share of stock
Stated value
the legal capital assigned per share to no-par stock
Outstanding stock
the number of shares held by investors; excludes treasury shares
Issued stock
the number of shares sold to investors; includes treasury shares
Additional paid-in capital
the portion of the cash proceeds above par value
Price-earnings ratio
the stock price divided by earnings per share so that both stock price and earnings are expressed on a per share basis
Authorized stock
the total number of shares available to sell, stated in the company's articles of incorporation
Organization chart
traces the line of authority within the corporation
Dividends in arrears
unpaid dividends on cumulative preferred stock
Angel investors
wealthy individuals in the business community willing to risk investment funds on a promising business venture
