Chapter 10 Accounting Terms

Treasury stock

A corporation's own stock that it has reacquired

Accumulated deficit

A debit balance in Retained Earning

Stock Split

A large stock dividend that includes a reduction in the par or stated value per share

Record Date

A specific date on which the company will determine the registered owners of stock and, therefore, who will receive the dividend

Stock Dividends

Additional shares of a company's own stock given to stockholders

S corporation

Allows a company to enjoy limited liability as a corporation, but tax treatment as a partnership

No-par value stock

Common stock that has not been assigned to par value

Articles of incorporation

Describes the nature of the firm's business activities, the shares to be issued, and the composition of the initial board of directors

Dividends

Distribution by a corporation to its stockholders

Privately held corporation

Does not allow investment by the general public and normally has fewer stockholders

Earnings per share

Measures the net income earned per share of common stock

Return on equity

Net income divided by average stockholders' equity; measure the income generated per dollar of equity

Return on the market value of equity

Net income divided by the market value of equity

Venture capital firms

Provide additional financing, ofter in the millions, for a percentage ownership in the company

Retained Earnings

Represents all net income, less all dividends, since the company began

Redeemable

Shares can be returned to the corporation at a fixed price

Cumulative

Shares receive priority for future dividends, if dividends are not paid in a given year

Convertible

Shares that can be exchanged for common stock

Preferred Stock

Stock with preference over common stock in the payment of dividends and the distribution of assets

Limited Liability

Stockholders in a corporation can lose no more than the amount they invested in the company

Growth Stocks

Stocks that tend to have higher price-earnings ratios and are expected to have higher future earnings

Value stocks

Stocks that tend to have lower price-earnings ratios and are priced low in relation to current earnings

Paid-in capital

The amount stockholders have invested in the company

Payment Date

The date of the actual cash distribution of dividends

Property dividend

The distribution of a noncash asset to stockholders

Initial public offering

The first time a corporation issues stock to the public

Par Value

The legal capital assigned per share of stock

Stated Value

The legal capital assigned per share to no-par stock

Outstanding Stock

The number of shares held by investors; excludes treasury stock

Additional paid-in capital

The portion of the cash proceeds above par value

Price-earnings ratio

The stock price divided by earnings per share so that both stock price and earnings are expressed on a per share basis

Organization Chart

Traces the line of authority within the corporation

Dividends in arrears

Unpaid dividends on cumulative preferred stock

Double taxation

a corporation pays income taxes on its earnings, and when dividends are distributed to stockholders, the stockholders pay taxes a second time on the corporate dividends they receive

Publicly held corporation

allows investment by the general public and is regulated by the Securities and Exchange Commission

Declaration Date

the day in which the board of directors declares a cash dividend to be paid

Issued Stock

the number of shares sold to investors; includes treasury stock

Authorized stock

the total number of shares available to sell, stated in the company's articles of incorporation

Angel investors

wealthy individuals in the business community willing to risk investment funds on a promising business venture