Accounting Chapter Eleven

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issued shares

actual number of shares sold or distributed to stockholders

dividend payout ratio

annual dividend amount/annual net incomes

categories that number of shares are reported in

authorized, issued, and outstanding

debt financing

borrowing from banks and other creditors

two types of stock

common stock and preferred stock

first item on stockholder's equity portion of the balance sheet

contributed capital

two major components of stockholder's equity

contributed capital and retained earnings

total stockholder's equity=

contributed capital+retained earnings

two methods to account for treasury stock

cost method and par value method

two sources of financing a company

debt and equity

participating

feature which allows the preferred stockholder to receive a dividend in excess of the regular rate when the firm has been particularly profitable

equity financing

issuing stock

convertible preferred stock

may allow stockholders the right to convert the stock into common stock

redeemable preferred stock

may allow stockholders to redeem their stock at a specified price

callable preferred stock

may be callable at the option of the company, the company can chose to pay a specified amount to the stockholders in order to redeem or retire the stock

outstanding shares

number of shares issued less number of shares held as treasury stock

stock dividend

occurs when a corporation declares and issues additional shares of its own stock to existing stockholders

statement of stockholders equity

reflects the difference in the beginning and ending balances for all accounts in the SE category of the BS

market value per share

selling price of the stock as indicated by the most recent transactions

two requirements to declare a cash dividend

sufficient cash must be available and retained earnings must have a sufficient positive balance

additional paid in capital

the amount received at issuance that exceeds par value

contributed capital

the amount the corporation received from the sale of stock to the stockholders

stock split

the creation of additional shares of stock with a reduction of the par value of the stock

authorized shares

the maximum number of shares a corporation may issue

accounts that must be eliminated when stocks are retired

the stock account and the paid-in capital account that were created at issuance

book value per share=

total stockholders equity/numbers of shares of stock outstanding

cumulative stock

unpaid dividends as well as current dividends on preferred stock must be paid before common stock dividends are declared

when does treasury stock occur

when a company repurchases its own stock after issuing it

retirement of stock

when the stock is repurchased with no intention of reissuing at a later date


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