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