Stockholders' Equity - ACCT 2010 Lecture Notes

These flashcards cover key terminology and concepts related to stockholders' equity as outlined in the lecture notes.

Debt vs. Equity

Debt is borrowed cash that must be paid back, while equity represents ownership in the firm.

Authorized Shares

Total number of shares that a company's board of directors allows the firm to sell as equity.

Issued Shares

Number of authorized shares that have been sold to investors.

Outstanding Shares

Number of issued shares that are currently held by investors.

Common Stock

Basic ownership of a firm, issued by all corporations.

Par Value

Nominal value associated with a stock.

Residual Claim

Equity holders receive payments after debt holders.

Dividends

Payments made to stockholders, typically from earnings.

Treasury Stock

Shares repurchased by a firm that are no longer outstanding.

Stock Split

An increase in the number of issued shares by subdividing existing shares.

Voting Rights

The rights of common stockholders to vote on company matters.

Additional Paid-in Capital (APIC)

The amount received from issuing stock above its par value.

Initial Public Offering (IPO)

The first time a firm sells stock to the public.

Seasoned Equity Offering

When a firm sells common stock after the IPO.

Cumulative Dividend Preference

Preferred stockholders must receive all missed dividends before common stockholders receive any.

Noncumulative Preferred Stock

Preferred stock that does not require payment of missed dividends.

Income Statement

Financial statement showing a company's revenue and expenses over a period.

Return on Equity (ROE)

Measure of a company's profitability in relation to shareholders' equity.

Earnings Per Share (EPS)

Indicator of a company's profitability on a per-share basis.

Price to Earnings Ratio (P/E)

Valuation ratio calculated by dividing the market price per share by EPS.

Dividend Yield Ratio

Ratio indicating how much a company pays out in dividends each year relative to its stock price.

Issuance

Process by which a company sells stock to raise capital.

Repurchase

When a company buys back its own shares from the market.

Common Equity

Type of equity that provides ownership in a company.

Preferred Equity

Class of ownership that often has a fixed dividend and no voting rights.

Cash Dividend

Cash payment made to shareholders from retained earnings.

Stock Dividend

A dividend paid in additional shares of stock rather than cash.

Dividend Declaration Date

The date on which a company's board of directors approves a dividend.

Record Date

The date by which a stockholder must own shares to receive a dividend.

Payment Date

The date on which the cash dividend is actually paid to shareholders.

Treasury Stock Transaction Effect

Transactions involving treasury stock do not affect the income statement.

Net Income

Profit after all expenses have been deducted from revenue.

Balance Sheet

Financial statement providing a snapshot of a company's assets, liabilities, and equity at a specific point in time.

Common Stockholder Rights

Rights that include voting on corporate matters and receiving dividends.

Market Price Per Share

The current price at which a share of stock can be bought or sold.

Cash Flow from Dividends

Inflows of cash resulting from dividend payments to shareholders.

Equity Issuance Journal Entry

The accounting record for selling shares to investors.

Stock Redemption

Process of repurchasing shares from investors.

Outstanding Shares Calculation

Issued shares minus any treasury stock held by the company.

Executive Compensation with Stock

Use of company stock as part of employee pay packages.

Dividend Policy

The strategy a company uses to decide how much it will pay shareholders in dividends.

Common Stock Classifications

General types of common stock include voting and non-voting shares.

Underwritten Offerings

When investment banks help companies to issue stock to the public.

Market Capitalization

Total market value of a company's outstanding shares.

Shareholder Equity

Total assets minus total liabilities, representing ownership interest in the company.

Liquidation Preference

The order in which assets are distributed to creditors and shareholders upon company liquidation.

Equity Financing

Raising capital by selling shares of stock in the company.

Debt Financing

Raising capital by borrowing funds from external lenders.

Stockholder Rights Plan

A strategy used by companies to prevent hostile takeover attempts.

Asset Claims

Prioritization of claims against the assets of a company.

Equity Valuation

Determining the worth of equity securities such as stocks.

Dividend Yield Calculation

Dividends per share divided by the stock's market price.

Preferred Stock Characteristics

Distinguishing features include fixed dividends and priority over common stock.

Common Stock Voting Rights

The right to vote on corporate policies and elect board members.

Treasury Stock Treatment

How repurchased stock is recorded and reported in financial statements.

Underpricing Stock

Selling shares below their intrinsic value due to market conditions.

Market Price Return

The return investors realize from stock price appreciation plus dividends.

Equity vs. Debt Risk

Equity carries more risk than debt due to its subordinate position in payment claims.

Equity Issuance Process

Steps involved in offering shares to the public market.

Recordkeeping for Dividends

Maintaining accurate logs of dividend declarations and payments.

Financial Statement Analysis

Evaluating a company's financial reports to understand its financial health.

Business Valuation Methods

Techniques used to assess a company's total worth.

Investor Relations

The process of managing communication between a public company and its shareholders.

Dividend Distribution Process

Steps followed from declaration to payment of dividends.

Market Dynamics Impacting Pricing

Factors influencing the stock price in the trading market.

Common vs. Preferred Stock

Comparison of risks, rewards, and shareholder rights associated with each.