Financial accounting final chapter 11

stock transfer agent

a bank or trust company retained by a corporation to maintain its records of capital stock ownership ad make transfers from one investor to another

corporation

a business organized as a legal entity separate from its owners. chartered by the state with ownership divided into shares of transferable stock. stockholders are not liable for debts in the corporation

closely held corporation

a corporation owned by a small group of stockholders. not publicly owned

publicly owned corporation

a corporation whose shares are traded on an organized stock exchange / any corporation whose shares are offered for sale to the general public

stock certificate

a document issued by a corporation (or its transfer agent) as evidence of the ownership of the number of shares states on the certificate

double taxation

a major disadvantage of the corporate form of organizing / the fact that corporate income is taxed to the corporation when earned and then again taxed to the stockholders when distributed as dividends

stockholders subsidiary ledger

a record showing the number of shares owned by each stockholder

additional paid-in capital

an account showing the amounts invested in a corporation by stockholders in excess of par value or stated value. in short, this account shows paid-in capital in excess of legal capital

stock split

an increase in the number of shares outstanding with a corresponding decrease in par value per share. the additional shares are distributed proportionately to all common shareholders. the purpose of a stock split is to reduce market price per share and encourage wider public ownership of the company's stock. for example, 2-for-1 stock split will give each stockholder twice as many shares as previously owned

stock registrar

an independent fiscal agent, such as a bank, retained by a corporation to provide assurance against over issuance of stock certificates

underwriter

an investment banking firm that handles the sale of a corporation's stock to the public

book value (per share)

common stockholders' equity divided by the number of common shares outstanding

dividends

distribution of assets (usually cash) by a corporation to its stockholders. normally viewed as a distribution of profits, dividends cannot exceed the amount of retained earnings. must be formally declared by the board of directors and distributed on a per-share basis. note: stockholders cannot simply withdraw assets from a corporation at will

legal capital

equal to the par value or stated value of capital stock issued. this amount represents a permanent commitment of capital by the owners of a corporation and cannot be removed without special legal action. of course, it may be eroded by losses.

paid-in capital

equity arising from investments by owners / the amounts invested in a corporation by its stockholders

market value

from investors' point of view, the most important value associated with capital stock

public information

information that, by law, must be made available to the general public. includes the quarterly and annual financial statements - and other financial information - about publicly owned corporations

board of directors

persons elected by common stockholders to direct the affairs of a corporation

dividends in arrears

prior year's dividends owed to holders of cumulative preferred stock

treasury stock

shares of a corporation's stock that have been issued and then reacquired, but not canceled

dividend yield

the annual dividend paid to a share of stock, expressed as a percentage of the stock's market value. indicates the rate of return represented by the dividend

common stock

the class of capital stock that normally has the most voting power / a type of capital stock that possesses the basic rights of ownership, including the right to vote. represents the residual element of ownership in a corporation

preferred stock

the class of stock for which market price normally inversely varies with interest rates / a class of capital stock usually having preferences as to dividends and in the distribution of assets in the event of liquidation

limited personal liability

the concept that the owners of a corporation are not personally liable for the debts of the business. thus stockholders' potential financial losses are limited to the amount of their equity investment

retained earnings

the element of stockholders' equity in a corporation that has accumulated through profitable business operations. increased by net income. net losses and dividends reduce retained earnings

par value (or stated value)

the legal capital of a corporation. represents the minimum amount per share invested in the corporation by its owners and cannot be withdrawn except by special legal action

stockholders

the owners of a corporation. the name reflects the fact that their ownership is evidenced by transferable shares of capital stock

state of incorporation

the state in which the corporation is legally formed. this may or may not be the state in which the corporation conducts most or any of its business

contributed capital

the stockholders' equity that results from capital contributions by investors in exchange for shares of common or preferred stock. also referred to as paid-in capital

capital stock

transferable units of ownership in a corporation. a broad term that can refer to common stock, preferred stock, or both