Financial Accounting Chapter 10

par value

arbitrary amount assigned to a share of stock

stock certificates

certificates that provide evidence of stock ownership

dividends in arrears

cumulative, unpaid dividends on cumulative preferred stock

treasury stock

a corporation's own stock that it has issued and later reaquired

stock dividend

a distribution by a corporation of its own stock to stockholders

underwriter

a firm that usually agrees to buy all the stock a company wants to issue if the firm cannot sell the stock to its clients

memorandum entry

a journal entry that "notes" a significant event, but which has no debit or credit amount

stated value

an arbitrary amount that is similar to par value but is assigned after a corporation is organized

stock split

an increase in the number of authorized, issued, and outstanding shares of stock coupled with a proportionate reduction in the par value per share of the stock

articles of incorporation (corporate charter)

describes the purpose, place, and other details of a corporation

return on equity (ROE)

net income divided by average stockholders' equity; it is a measure of profitability

paid-in capital in excess of par (additional paid-in capital)

paid-in capital that represents the amount by which the issue price of stock exceeds its par value

cumulative preferred stock

preferred stock whose owners must receive all dividends in arrears plus the current year dividend before the corporation pays dividends to the common stockholders

capital stock

represents the individual's ownership of the corporation's capital

outstanding stock

stock in the hands of stockholders

preferred stock

stock that gives its owners certain advantages over common stockholders, such as the right to receive dividends before the common stockholders and the right to receive assets before the common stockholders if the corporation liquidates

share

the basic unit of stock

issue price

the initial selling price for a share of stock

common stock

the most typical kind of stock; it usually has voting rights, the right to receive dividends, and the right to receive assets if the company liquidates

authorized stock

the number of shares of stock a corporation is authorized by a state to sell

legal capital

the portion of stockholders' equity that cannot be used for dividends