ACCT 105 Final Quiz / Exam Flashcards

corporation

artificial being created in accordance with state laws; owners are separate and distinct from the corp itself; stockholders have limited liability; corp is subject to double taxations

Articles of Incorporation

the application they must file to be one; states the purpose of the corp, the type, number of shares, the process of electing board of directors

Corporate Charter

the agreement between the corporatation and the state

Stockholders’ Equity consists..

capital stock, APIC, treasury stock, retained earnings

Capital Stock

paid-in capital; common & preferred stock

APIC

additional paid in capital; additional money created when stock is sold to the public

sales price of stock

net value of stock

preferred stock

no voting rights; dividends received first before common stock; dividends fixed in amount

par value of the stock

the original value of the stock certificate or bond

What are the two benefits for preferred stock?

That they have a fixed amount and that they are received before common stock

PS APIC

the difference betwee market price of the stock issued and the par value (market-par)

common stock

voting rights, dividends received after preferred stock, dividends vary in amount

What is the benefit of common stock?

They have voting rights, meaning that they get to have a say on some of the operations in the company

CS APIC

the difference between market price and par value (market-par)

Treasury Stock

shares that the company bought back

Why do businesses buy back treasury stock?

to reduce dividend payments, to increase company EPS (earning per share), used in mergers (Think T-Mobile x Sprint, Merill X Bank of America, AT&T x Time Warner)

Fair Market Value

The price of the bond / stock determined by the marketplace (objective purchasers)

Limited Liability

owners of the corporation only lose their investments into the company; can’t lose personal assets

Double taxation

corporations are taxed both by the IRS directly and through the stockholders

Rights that common stockholders have

voting rights, share of profits, liquidation rights, inspecting financial statements

Dividends in arrears

outstanding dividends owed to preferred stockholders; calculated in cumulative stock