Accounting Principles: Stockholders' Equity (ACCT 2010)

These flashcards cover key vocabulary terms and definitions related to stockholders' equity as discussed in Chapter 10 of the Accounting Principles course.

Debt vs. Equity

Debt refers to borrowed money that must be paid back, while equity represents ownership in a firm.

Authorized shares

Total number of shares the board of directors will allow the firm to sell as equity.

Issued shares

Number of authorized shares that have been sold to investors.

Outstanding shares

Number of issued shares currently held by investors.

Treasury stock

Shares repurchased by the firm and no longer held by investors.

Common stock

Represents basic ownership of a firm and is traded on stock markets.

Par value

A nominal value associated with a stock, used historically to protect capital.

Dividends

Payments made to shareholders from the profits of a company.

Stock splits

The process of increasing issued shares by subdividing existing shares without affecting total stockholders' equity.

Preferred equity

A class of ownership that has a fixed dividend and no voting rights, prioritized over common equity in payments.

Return on Equity (ROE)

A measure of a company's ability to generate income from capital provided by owners; calculated as Net Income divided by Average Stockholders' Equity.

Earnings Per Share (EPS)

A measure of profitability calculated as Net Income minus Dividends for Preferred Stock over Average Number of Shares of Common Stock Outstanding.

Price to Earnings (P/E) ratio

A ratio used to evaluate a stock's trading price relative to its earnings.

Dividend Yield

A measure of return on investment calculated as Dividends per Share divided by Market Price per Share.

Cumulative preferred stock

Preferred stock which requires that missed dividend payments must be paid before common shareholders receive dividends.

Noncumulative preferred stock

Preferred stock that does not require payment of any missed dividends.