Chapter 11: Corporate Reporting and Analysis

Vocabulary practice flashcards covering fundamental concepts, stock classifications, dividend procedures, treasury stock, and analytical ratios from Chapter 11: Corporate Reporting and Analysis.

Corporate Governance

The system by which companies are directed and controlled, structured from stockholders down through the board of directors, executive officers, and corporate employees.

Stock Certificate

A document that serves as proof that a stockholder has purchased and owns shares of a corporation.

Authorized Stock

The total number of shares of stock that a corporation's charter authorizes it to sell.

Issued Stock

The total amount of authorized shares that have been sold or distributed to stockholders.

Outstanding Stock

The portion of issued stock currently held by stockholders, which declines if a company buys back its stock.

Common Stock

The standard class of corporate stock where all shares have the exact same rights and characteristics, such as voting and sharing in dividends.

Par Value

An arbitrary dollar amount assigned to each share of stock in the corporate charter when it is authorized.

Market Value (Market Price)

The price at which a share of stock is bought and sold on the open market.

Paid-In Capital

The total amount of cash and other assets received by a corporation in exchange for issuing stock (also called contributed capital).

Retained Earnings

The cumulative net income less any net losses and dividends declared since the corporation began operations.

Date of Declaration

The date when the board of directors votes to approve a dividend payment, creating a legal liability for the corporation.

Date of Record

The date specified by directors on which stock ownership is identified to determine dividend recipients; no journal entry is required.

Date of Payment

The date when a corporation pays cash or distributes shares to stockholders to settle a declared dividend.

Stock Dividend

A distribution of a corporation's own shares to its stockholders without receiving any payment in return, used to keep the stock price affordable and demonstrate management confidence.

Small Stock Dividend

A stock dividend distribution that is $\le 25\%$ of previously outstanding shares, recorded by capitalizing retained earnings for the market value of the shares.

Large Stock Dividend

A stock dividend distribution that is $> 25\%$ of previously outstanding shares, recorded by capitalizing retained earnings for the par or stated value of the shares.

Stock Split

The distribution of additional shares to stockholders according to their percent ownership, accompanied by a proportional reduction in par value per share.

Preferred Stock

A class of capital stock that carries specific preferences over common stock, typically regarding dividend payments and distribution of assets upon liquidation.

Cumulative Preferred Stock

Preferred stock that gives holders the right to receive current-year dividends plus any unpaid dividends from prior years before any dividend is paid to common stockholders.

Noncumulative Preferred Stock

Preferred stock where undeclared dividends from current and prior years do not accumulate and do not have to be paid in future years.

Dividends in Arrears

An unpaid dividend on cumulative preferred stock from a prior period that must be paid before any future dividends are distributed to common stock.

Treasury Stock

Shares of a corporation's own stock that were issued and subsequently reacquired by the company, reported as a reduction in total stockholders' equity.

Prior Period Adjustments

Corrections of material errors made in past financial statements that are reported as adjustments to the beginning balance of retained earnings net of tax.

Basic Earnings Per Share (EPS)

A core financial statistic calculated as: $\text{Basic earnings per share} = \frac{\text{Net income} - \text{Preferred dividends}}{\text{Weighted-average common shares outstanding}}$

Price-Earnings (PE) Ratio

A metric reflecting market expectations for future earnings and dividend growth, calculated as: $\text{Price-earnings ratio} = \frac{\text{Market value (price) per share}}{\text{Earnings per share}}$

Dividend Yield

A metric reporting the annual cash dividends distributed to common stockholders relative to the stock's market value, calculated as: $\text{Dividend yield} = \frac{\text{Annual cash dividends per share}}{\text{Market value per share}}$