Authorized Shares, No-Par Value Stock, Stated Value, Stockho
Negative equity
May indicate impending bankruptcy
Cash dividends and equity
Shrink shareholders' equity and cash balance by the same amount
Stated value and legal capital
Stated value assigned to satisfy minimum legal capital requirement
Low-par value stock
Stock issued with a price as low as $0.01
No-par value stock
Stock issued without a par value
Stated value
Amount assigned to stock for internal accounting purposes
Stockholders' equity
Assets remaining after settling all liabilities
Failed business not fully capitalized
Business collapse may reveal insufficient capitalization
Outstanding stock
Shares held by stockholders
Advantage of no-par value stock
Companies can issue stock at higher prices in future offerings
Positive equity
Company has enough assets to cover liabilities
Number of authorized shares disclosed
Disclosed in equity section of balance sheet or notes
Stock splits
Distribution of additional shares to stockholders based on percent ownership
Stock dividend
Dividend paid in the form of additional shares in the company
Monetary interest of low stated value
Interest is modest or de minimus
No journal entry for stock authorization
No entry needed for stock authorization
Taxability of stock dividend
Not taxable until shares are sold
Authorized shares
Number of shares a corporation is allowed to sell
Choice to accept or reinvest cash dividends
Option given by most brokers
Regular cash dividends
Paid on a regular basis, such as monthly
Cash dividend
Payment made by company to stockholders in cash
Natural variations of no-par stock price
Price fluctuates based on supply and demand
Reasons for issuing preferred stock
Raise money, boost return for common stockholders, appeal to risk-averse investors
Preferred Stock
Separate class of stock with priority in dividends and liquidation
Equity calculation
Total assets minus total liabilities or share capital plus retained earnings minus treasury stock