Chapter 10: Stockholders’ Equity

These flashcards cover key concepts related to stockholders' equity, including terms, definitions, and principles discussed in Chapter 10.

Stockholders (Shareholders)

The owners of a corporation who have rights such as voting, receiving dividends, and liquidation.

Contributed Capital (Paid-in Capital)

The amount of capital contributed to the corporation by its original stockholders.

Par Value

A nominal amount assigned to each share when originally authorized by the corporate charter.

Treasury Stock (TS)

Shares of a company’s own stock that have been repurchased by the company.

Dividends

A proportional distribution of a firm’s earnings to its stockholders.

Cumulative Preferred Dividends

Unpaid dividends from past years that must be paid in full before common shareholders receive any dividends.

Initial Public Offering (IPO)

The first time a corporation sells stock to the public.

Outstanding Stock

Number of issued shares held by outside stockholders.

Additional Paid-In Capital (APIC)

The excess of selling price over the par value paid.

Stock Split

An increase in the number of shares issued and outstanding, coupled with a decrease in the par value of the stock.

Liquidation Preference

The right of preferred stockholders to receive assets before common stockholders upon liquidation.

Board of Directors

Officials elected by stockholders to manage the corporation.

Common Stock (CS)

The basic form of capital stock issued by every corporation.

Preferred Stock (PS)

A hybrid stock that pays fixed dividends and has liquidation preference over common stock.

Dividends Payable

A liability recorded once the board of directors declares a dividend.

Economies of Scale

The cost advantage that arises with increased output.

Going Concern Assumption

The assumption that a business will continue to operate indefinitely.

Legal Capital

The state-required amount of capital that must remain invested in the business.

Noncumulative Preferred Dividends

Preferred dividends that do not accumulate if not declared.