Chapter 11

Stated Value Stock

No-par value stock to which the directors assign a "stated" value per share.

Basic Earnings Per Share

The amount of income earned per each share of a company's outstanding common stock. (Net income - Preferred dividends)/weighted-average common shares outstanding.

Date of Declaration

The date the directors vote to declare and pay a dividend.

Date of Payment

The date when the corporation makes payment.

Stock Split

The distribution of additional shares to stockholders according to their percent ownership.

Date of Record

The future date specified by the directors for identifying those stockholders listed in the corporation's records to receive dividends.

Authorized Stock

The number of shares that a corporation's charter allows it to sell.

Market Value of Stock

The price at which a stock is bought and sold.

Three Important Dates for Cash Dividends

1. Date of Declaration 2. Dat of Record 3. Date of Payment

Disadvantages of a Corporation

1. Government regulation 2. Corporate taxation

Two Types Of Corporations

1. Privately Held - corporation does not offer its stock for public sale and usually has few stockholders. 2. Publicly held - offers its stock for public sale and can have thousands of stockholders.

Advantages of a Corporation

1. Separate legal entity 2. Limited Liability of stockholders 3. Transferable ownership rights. 4. Continuous life 5.Lack of mutual agency for stockholders 6.Ease of capital accumulation

Stockholders Rights

1. Vote at stockholders' meetings 2. Sell or otherwise dispose of their stock 3. Purchase their proportional share of any common stock later issued by the corporation. 4. Receive the same dividend, if any, on each common share of the corporation. Share in any assets remaining after creditors and preferred stockholders are paid when, and if, the corporation is liquidated.

Direct Sale (issuing) of Stock

A corporation advertises its stock issuance to potential buyers.

Indirect Sale (issuing) of Stock

A corporation pays a brokerage house to issue its stock.

Definition of a Corporation

An Entity created by law that is separate from its owners. It has most of the rights and privileges granted to individuals. Owners of corporations are called stockholders or shareholders.

Capital Stock

Refers to any shares issued to obtain capital (owner financing)

Price-Earnings Ration

Some analysts interpret this ratio as what price the market is willing to pay for a company's current earnings stream. (Market value (price) per share)/Earnings per share.

Pyramid Of Corporate Management

Stockholders control corporation - elect board of directors - elect president, vice president and other officers - hire employees of the corporation.

Cumulative Preferred Stock

This has a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Book Value per Share

This reflects the amount of equity applicable to common shares on a er share basis.

Dividend Yield

This shows the annual amount of cash dividends distributed to common shares relative to their market value. (Annual cash dividends per share)/(Market value per share)