chapter 10: Shockholder

The amount of money paid into a company by its owners is referred to as: Investment in common stock retained earnings owners' surplus invested capital

invested capital

The advantages to the corporate form of business include transferability of ownership. ease of raising capital. double taxation for the corporation.

transferability of ownership. ease of raising capital.

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as______ earning

etained or reinvested

A corporate charter: specifies the number of shares outstanding. is required only for publicly-traded corporations. names the board of directors. describes the business activities. specifies the shares of stock to be issued.

names the board of directors. describes the business activities. specifies the shares of stock to be issued.

Earned capital increases ____. . accumulated other comprehensive income retained earnings common stock

retained earnings

A distribution of assets to shareholders is referred to as a(n)______

dividend or dividends

When a corporation distributes assets of the company to its investors, it is referred to as a(n) Multiple choice question. dividend. expense. warrant. option.

dividend.

Preferred stockholders: must receive dividends every year. have the right to receive dividends only if there are enough dividends to pay the common stockholders too. have the right to receive dividends only in the years the board of directors declares dividends. must receive more dividends per share than the common stockholders.

have the right to receive dividends only in the years the board of directors declares dividends.

Another common term for stockholders' equity is: shareholders' equity retained equity undistributed equity investment equity

shareholders' equity

The statement of shareholders' equity reports the changes in each shareholder equity account. assets, liabilities, and owners' equity for the period. the revenues and expenses for the period. the changes to assets over the period.

the changes in each shareholder equity account.

Which of the following is included in the rights of common stockholders? Right to vote on certain matters. Right to restrict preferred stock. Right to purchase assets of the corporation. Right to dividend payment every yea

Right to vote on certain matters.

Which of the following will decrease the par value of shares? large stock dividend stock split both a stock split and a stock dividend

stock split

Shareholders' equity is another common term for __________equity

stockholders', owners', or stockholders

Shares of stock that are repurchased are referred to as_____ stock

treasury

Shares of stock previously sold by the corporation that are repurchased are called treasury stock. additional paid-in capital. investments in securities. available for sale securities.

treasury stock.

Which of the following transactions are classified as a stock dividend? A distribution of shares of stock held as an investment to stockholders of the corporation. A distribution of additional shares of a corporation's stock to current shareholders of the corporation. A distribution of stock options to current employees as incentive compensation. A distribution of stock to corporate executives as an inducement to extend their contract with the corporation.

A distribution of additional shares of a corporation's stock to current shareholders of the corporation.

The purpose of the statement of shareholders' equity is to reconcile the balance sheet with the statement of cash flows. report the additional expenses of the company that were not accrued during the year. reconcile net income with taxable income and retained earnings. report the changes and the sources of the changes in shareholder equity accounts.

report the changes and the sources of the changes in shareholder equity accounts.

Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights: guaranteed dividends first right to specified amount of dividends consistently higher return than earned by common stockholders preference in distribution of assets during dissolution of corporation

- first right to specified amount of dividends - preference in distribution of assets during dissolution of corporation

Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide? Multiple choice question. Return on equity Earnings per share Return on assets Dividend yield

Return on equity

Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the debt. investment. market share.

investment.

In a corporation, the stockholders' potential loss is limited to the amount of the investment. limited to the amount of net income. unlimited with responsibility for all corporate losses.

limited to the amount of the investment.

Limited liability and ease of raising outside capital are advantages of this business form: Corporation Partnership Sole Proprietorship

Corporation

True or false: A corporation is owned by debt and equity holders.

False

________ capital is the amount of money paid into a company by its owners.

Invested, Contributed, or Paid-in

Which of the following is typically presented first in the equity section of the balance sheet? Preferred stock Treasury stock Retained earnings Common stock

Preferred stock

Distributions of stock to current shareholders of a corporation are called what type of distribution Property dividend Treasury stock Stock dividend Stock split

Stock dividend Stock split

The number of shares authorized is set forth in the company's: general journal general ledger articles of incorporatio

articles of incorporation

Preferred stock carries priority over common stock: only when a corporation is dissolved both for dividends and at dissolution only when dividends are declared and paid

both for dividends and at dissolution

A frequent reason for a stock split is to ssue more shares of stock so investors have more value. cause the market price per share to decline. give the investors an extra dividend for the year. shift amounts from retained earnings to other equity accounts.

cause the market price per share to decline.

Special contractually granted features can make preferred stock:

convertible redeemable cumulative

A 2-for-1 stock split increases the marketability of the stock because shareholders receive cash. investors have twice as many shares to sell. the new shares are restricted. the market price per share decreases.

the market price per share decreases.

When a business incorporates, it must file its ______ with the state in which it incorporates. initial public offering proxy statement articles of incorporation federal tax return

articles of incorporation

The total number of shares that a company may sell is referred to as_________ shares

authorized

Return on______measures the ability of company management to generate earnings from the resources provided by owners.

equity

A corporation is owned by its________

stockholders, shareholders, or investors

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet? Common stock The sequence is unimportant Preferred stock

Preferred stock

The rights of common stockholders typically include which of the following? Right to dividends when declared. Right to receive a percentage of net income each year. Right to distribution of assets in liquidation. Right to vote for corporate directors.

Right to dividends when declared. Right to distribution of assets in liquidation. Right to vote for corporate directors.

Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders? A variable interest rate that increased each year The right to redeem the preferred shares for cash The right to convert the shares to common shares

The right to redeem the preferred shares for cash The right to convert the shares to common shares

Positive_______represent the key to a company's long-run survival

earnings, income, profit, or earning

Preferred stock is advantageous in that it: has priority over common stock when dividends are declared. receives dividends before creditors are to receive any interest payments. has priority over creditors at liquidation. has priority over common stock at liquidation

has priority over common stock when dividends are declared. has priority over common stock at liquidation.

The most important advantage to the corporate form of business is regulation. limited liability. double taxation. ease of formation.

limited liability.

A corporation's accumulated, undistributed net income or loss is referred as comprehensive income. corporate dividends. retained earnings. accumulated comprehensive income.

retained earnings.

Another common term for stockholders' equity is: investment equity shareholders' equity undistributed equity retained equity

shareholders' equity