SDSU ACCTG 201 FINALS
The possibility that a company will be unable to pay its loans and its interest payments when due refers for the company's
default risk
Equity financing
refers to obtaining investment from stockholders
Stated interest rate
the rate of interest printed on the face of a bond
Additional shares issued to existing owners without an exchange of cash may be in the form of
stock dividends stock splits
Earnings per share measures the _____ earned per share of common stock
net income
positive _____ represent the key to a company's long run survival
earnings
most newly created companies are financed selling shares to
family and friends
Risk exposure: Common stock
highest
Issued at a premium
carrying value decreases over time and is equal to face amount at maturity
Issued at face amount
carrying value does not change and is equal to issue price
stock splits
cause the par value per share to change
Preferred stock has a mixture of attributes of both _____ and _____
debt; equity AND both preferred and common stock
Payment date
dividends payable is decreased
Dividends payable is a _____ account with a normal _____ balance and is recorded on the _____ _____
liability; credit; declaration
Risk exposure: Bonds
lowest
a common reason for redeeming a bond prior to its maturity date is that
market interest rates decreased
Risk exposure: Preferred stock
middle
Treasury stock
represents a corporation's own stock that has been reacquired
the declaration of cash dividends reduces
retained earnings
A corporation is owned by its
stockholders
Proceeds from issuing new par value common stock are allocated between:
Common stock Additional paid in capital
Investors who acquire preferred stock:
Do not have voting rights That is cumulative have the right to receive dividends in arrears once dividends are declared Have preference as to dividends
A corporate charter
Is required before stock is issued Specifies the rights and characteristics of the stock Specifies the number of shares authorized
Market value of equity is equal to:
Number of shares outstanding x current stock price
Which of the following are sources of shareholders' equity?
Paid in capital Retained earnings
Large stock dividends are recorded at _____ and small stock dividends are recorded at _____
Par value Market value
Cumulative preferred stock
a company pays dividends that were not declared last year
Par value
the legal capital per share of stock that is assigned when the corporation is first established is referred to as
Convertible preferred stock
turning in preferred stock for common shares
A business that incorporates must file a document with the state. Which of the following terms are used to describe this document?
Articles of incorporation Corporate charter
Bonds may issue at
Face amount A discount A premium
Which of the following reports net income relative to average stockholders' equity in dollars?
ROE (return on equity)
Which of the following occurs on the date of record?
a list of shareholders that are entitled to receive a dividend is made
When a business incorporates, it must file its _____ with the state in which it incorporates
articles of incorporation
Retained earnings represents _____ by the business
cumulative profits earned cumulative net income kept
Redeemable preferred stock
demanding the return of preferred stock at a pre-specified amount
stock dividend
distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders; require a journal entry
Date of record
stock records are finalized to determine which stockholders are to receive payment
Bonds that require payment of the full principle amount of the bond at the end of the loan term are referred to as
term bonds
shares of stock that are repurchased are referred to as
treasury stock
Issued at a dicount
carrying value increases over time and is equal to face amount at maturity
Stock splits and dividends
cause total stockholders' equity to remain the same
The P/E ratio is calculated by_____
dividing the stock price by earnings per share
Advantages to the corporate form of business
Ease of raising capital Transferability of ownership
When does a corporation record an increase in dividends payable?
On the declaration date
Preferred stock is "preferred" over common stock by providing preferred stockholders with these rights:
Preference in dist. of assets during dissolution of corp First right to specified amount of dividends
Declaration date
the board of directors officially approves a dividend
outstanding shares
number of shares issued less treasury shares repurchased by the corporation
