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