Chapter 10
Public corporation
Allows public investment More stockholders Regulated by the SEC Examples: Wal-Mart, Microsoft, Intel
Retained Earnings
Amount of earnings the corporation has retained _____=net income- total dividends normal credit balance
Paid-in capital
Amount stockholders have invested in the corporation
Treasury Stock
Corporation's own stock that it has reacquired
Cash Dividends
Distributions by a corporation to its stockholders; A change in a quarterly or annual cash dividend paid by a company can provide useful information about future prospects
Price-Earnings Ratio (PE Ratio)
Indicates how the stock is trading relative to current earnings _____= stock price / earnings per share
Par Value
Legal capital per share of stock that's assigned when the corporation is first established
earnings per share
Measures net income earned per share of common stock ______= net income- dividends on preferred stock / average shares of common stock outstanding
return on equity
Measures the ability of company management to generate earnings from the resources that owners provide ______= net income / average stockholders' equity
Private Corporation
No public investment Fewer stockholders Not regulated by the SEC Examples: Cargill (agricultural commodities) Koch Industries (oil and gas), Mars (food and candy)
Venture capital firms
Provide additional funding and business expertise
Large stock dividends
Records a decrease in retained earnings and an increase in common stock Recorded at par value
outstanding stock
Share held by investors (excludes treasury stock)
Dividend Yield
measures how much a company pays out in dividends relative to its share price _____= dividends per share / stock price
convertible stock
shares can be exchanged for common stock
redeemable stock
shares can be returned to the corporation at a fixed price
cumulative stock
shares receive priority for future dividends if dividends are not paid in a given year
Dividend Record Date
specific date on which the company will determine who will receive the dividend (registered owners of stock)
intial public (IPO)
The first time a corporation issues stock to the general public
Angel investors
Wealthy investors, like those featured on the television show Shark Tank
Authorized stock
____= issued shares + unissued shares Shares available to sell (issued and unissued)
Issued Stock
____= outstanding shares + treasury stock shares actually sold (includes treasury stock)
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 Reduces par value per share and increases shares outstanding No need to record transaction
Stock Dividends
additional shares of a company's own stock given to stockholders as dividends
Dividend payment date
date of the actual cash distribution
Dividend Declaration Date
date on which board of directors declares the cash dividend to be paid