Ch.12&13

Earnings per share (EPS)

Earnings to the common stockholders on a per share basis, computed as income available to common stockholders divided by the weighted average number of common shares outstanding

Board of directors

Elected by the stockholders to have primary responsibility for formulating policies for the corporation. The board also authorizes contracts, declares dividends, establishes executive salaries, and grants authorization to borrow money.

Callable preferred stock

If the stock is nonconvertible, it must be surrendered to the company when the holder is requested to do so. If the stock os convertible, it may be either surrendered or covered into common shares when called

Treasury Stock

Shares of capital stock issued and reacquired by the issuing corporation; they have not been formally canceled and are available for re-issuance.

Common Stock

Shares of stock representing the residual equity in the corporation. If only one class of stock is issued, it is known as common stock. All other claims rank ahead of common stockholders' claims

Book value per share

Stockholders equity per share; the amount per share each stockholder would reeve if the corporation were liquidated without incurring any further expenses and if assets were sold and liabilities liquidated at their recorded amounts

Paid-in Capital - Common (preferred) Treasury Stock Transactions

The account credited when treasury stock is reissued for more than its cost; this account is debited to the extent of its credit balance when such shares are reissued at less than cost

Liquidation value

The amount a stockholder will receive if a corporation discontinues operations and liquidates by selling its assets, paying its liabilities, and distributing the remaining cash among the stockholders

Dividend on preferred stock

The amount paid to preferred stockholders as a return for the use of their money; usually a fixed or stated amount expressed in dollars per share or as a percentage of par value per share

Articles of incorporation

The application for the corporation's charter

Corporate Charter

The contract between the state and the incorporators of a corporation, and their successors, granting the corporation its legal existence

Price-earnings ratio

The current market price per share of common stock divided by EPS

Date of payment (of dividends)

The date f actually payment of a cash dividend, or insurance of additional shares for a stock dividend

Date of record (of dividends)

The date of record established by the board that determine the stockholders who will receive dividends

Date of declaration (of dividends)

The date the board of directors take action in the form of a motion that dividends be paid

Call premium (on preferred stock)

The difference between the amount at which a corporation calls its preferred stock for redemption and the par value of the stock

Capital stock outstanding

The number of shares of authorized stock issued and currently held by stockholders

Capital stock authorized

The number of shares of stock that a corporation is entitled to issue ad designated in its charter

Retained earnings

The part of stockholder's equity resulting from net income, reduced by dividends and net losses. The account to which the results of corporate activity, including prior period adjustments, are carried and to which dividends and certain items resulting from capital transactions are charged

Market value

The price at which shares of capital stock are brought and sold in the market

Redemption value

The price per share at which a corporation may call in (or redeem) its capital stock for retirement

Minutes book

The record book in which actions taken at stockholders' and board of directors' meetings are recorded; the written authorization for many actions taken by corporate officers

Preemptive right

The right of stockholders to buy additional shares in a proportion equal to the percentage of shares already owned

Stock Dividend Distributable - common account

The stockholders' equity (paid in capital) account that is created for the par or stated value of the shares distributable when recording the declaration of a stock dividend

Capital stock

Transferable units of ownership in a corporation

Stock-transfer agent

Typically, a bank or trust company employed by a corporation to transfer stock between buyers and sellers

Stock registar

Typically, a bank that maintains records of the shares outstanding for a company

Shares of stock

Unites of ownership in a corporation

Net-of-tax effect

Used for discontinued operations, extraordinary items, changes in accounting principle, and prior period adjustments, whereby items are shown at the dollar amounts remaining after debuting the effects of such items on income taxes, if any, payable currently.

Dividends

Distribution of earnings by a corporation to its stockholders

Incorporators

Persons seeking to bring a corporation into existence

Cumulative preferred stock

Preferred stock for which the right to receive a basic dividend accumulates if any dividends have not been paid; unpaid cumulative preferred dividends must be paid before any dividends can be paid on the common stock

Noncumulative preferred stock

Preferred stock on which the right it received a dividend expires if the dividend is not declared

Convertible preferred stock

Preferred stock that is convertible into common stock of the issuing corporation

Donated capital

Results from donation of assets to the corporation, which increases stockholders' equity

Bylaws

A st of rules or regulations adopted by the board of directors of a corporation to govern the conduct of corporate affairs. The bylaws must be in agreement with the laws of the state and the policies and purposes in the corporate charter

Stated of stockholders' equity

A summary of the transactions affecting the accounts in the stockholders' equity section of the balance sheet during a stated period of time

Deficit

A debit balance in the Retained Earnings account

Stock split

A distribution of 100% or more of additional shares of the issuing corporation's stock, accompanied by a corresponding reduction in the par value per share. The purpose of a stock split is to cause a large reduction in the market price per share of the outstanding stock

Dividend

A distribution of assets (usually cash) that represents a withdrawal of earnings by the owners

Statement of retained earnings

A formal statement showing the times causing changes in inappropriate and approrpriated retained earning during a state period of time

Proxy

A legal document signed by a stockholder, giving another person the authority to vote the stockholder's shares at a stockholder's meeting

Return on average common stockholders' equity

A measure of the income-producing ability of the company. It is the ration of net income available to common stockholders divided by average common stockholders' equity

Stock certificate

A printed or engraved document serving as evidence that the holder owns a certain number of shares of capital stock

Paid-in capital

Amount of stockholders' equity that normally results from the cash or other assets invested by owners; it may also result from services provided for shares of stock and certain other transactions

Legal capital (stated capital)

An amount prescribed by law (usually the par value or stated value of shares issued) below which a corporation may not reduce stockholders' equity through the declaration of dividends or other payments to stockholders

Stated value

An arbitrary amount assigned by the board of directors to each share of a given class of no par stock

Par value

An arbitrary amount assigned to each share of a given class of stock and printed on the stock certificate

Corporation

An entity recognized by law as possessing an existence separate and distinct from its owners; that is, it is a separate legal entity. It is granted many of the rights, and placed under many of the obligations, of a natural person. In any given state, all corporations organized under the laws of that state are domestic corporations; all others are foreign corporations

Liquidating dividends

Dividends that are a return of contributed capital, not a distribution chargeable to retained earnings

Stock dividends

Dividends that are parable in additional shares of the declaring corporation's capital stock

Paid-in capital in excess of par (or stated) value - common or preferred

Capital contributed to a corporation in addition to that assigned to the shares issued and recorded in capital stock accounts

Unissued shares

Capital stock authorized but not yet issued

Preferred stock

Capital stock that carries certain features or rights no carried by common stock. Preferred stock may be preferred as to dividends, as to assets, or as to both dividends and assets. Preferred stock may be callable and/or convertible and may be cumulative or non cumulative.

No par stock

Capital stock without par value, to which a state value may or may not be assigned

Cash dividends

Cash distributions of accumulated earnings by a corporation to its stockholders

Changes in accounting principle

Changes in accounting methods pertaining to such items as inventory

Prior period adjustments

Consist almost entirely of corrections of error in previously published financial statements. Prior period adjustments are reported in the statement of retained earnings net of their tax effect

Stockholder's ledger

Contains a group of subsidiary accounts showing the number of shares of stock currently held by each stockholder

Retained earnings appropriations

Contractual or voluntary restrictions or limitation on retained earnings that reduce the amount of dividends that may be declared

Organization costs

Costs of organizing a corporation, such as incorporation fees and legal fees applicable to incorporation

Dividends in arrears

Cumulative unpaid dividends, including quarterly dividends not declared for the current year

Extraordinary items

Items both unusual in nature and infrequent in occurrence; reported in the income statement net of their tax effects, if any

Stock preferred as to assets

Means that in liquidation, the preferred stockholders are entitled to receive the par value (or a larger stipulated liquidation value) per share before any assets may be distributed to common stockholders

Stock preferred as to dividends

Means that the preferred stockholders are entitled to receive a specified dividend per share before any dividend on common stock is paid

Income available to common stockholders

Net income less any dividends on preferred stock

Discontinued operation

When a segment of a business is sold to another company or is abandoned

Discount on capital stock

the amount by which the par value of shares issued exceeds their issue price. The original issuance of shares at a discount is illegal in most states