Chapter 10: Stockholders' Equity

No-par value stock

common stock that has not been assigned a par value

features of preferred stock

convertible - shares can be converted into common stock redeemable - shares can be returned to (or redeemed by) to the corporation at a fixed price cumulative - shares receive priority for future dividends

Treasury Stock

corporation's own stock that is has reacquired

right to participate proportionally in dividends

ensures stockholders receive an appropriate amount of any dividends declared by the company

preemptive right

ensures that stockholders can maintain their ownership percentage when new stock is issued

right to participate proportionally in residual assets

ensures that stockholders receive an appropriate amount of assets upon liquidation on the company

right to vote

gives stockholders the right to participate in company governance by voting on actions that require owner approval

comparisons

investors in common stock are the owners of the corporation because they have voting rights. Investors in bonds are creditors who have loaned money to the corporation. Preferred stockholders have characteristics of both

Par Value

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

Issued Stock

number of shares that have been sold to investors (usually not all of its authorized stock) (includes treasury stock)

4 rights of Common Stockholders

right to vote, right to participate proportional in dividends, right to participate proportionally in residual assets, preemptive right

Retained Earnings

the amount of earnings the corporation has kept of retained - the earnings not paid out in dividends

Invested capital

the amount of money paid into a company by its owners

Paid-in Capital

the amount stockholders have invested in the company

Outstanding Stock

the number of shares held by investors (excludes treasury stock)

Authorized Stock

total number of shares available to sell, stated in the company's articles of incorporations

Total Stockholders' Equity

total paid-in capital + retained earnings - treasury stock

Additional Paid-In Capital

account to credit if a company issues common stock greater than par value

Preferred Stock

preferred stockholders have first rights to dividends and receive preference in the distribution of assets if the company goes under BUT they do not have a right to vote