Corporation and Stockholders' Equity Overview

These flashcards cover key concepts related to corporations, stockholders' equity, stock dividends, and related financial principles.

Corporation

An entity whose existence is separate from its owners.

Stockholders' Equity

Represents shareholders' ownership interest in the corporation's assets.

Treasury Stock

Stock purchased by a company in the open market, recorded as a contra equity.

Preferred Stock

Stock with preferential treatment related to dividends and liquidation.

Common Stock

Stock that has voting rights and represents a basic form of capital stock.

Paid-In Capital

Capital contributed by stockholders, includes Common and Preferred Stock.

Retained Earnings

All net income less dividends over the life of a company.

Dividends

Distribution by a corporation to its shareholders in the form of cash, stock or noncash assets.

Double Taxation

Occurs when corporate earnings are taxed at both the corporate and individual levels.

Stock Split

An increase in the number of shares, which decreases the par value and market price of each share.

Initial Public Offering (IPO)

The process by which a private company issues shares to the public for the first time.

Voting Rights

The right of shareholders to vote on important corporate matters.

Cumulative Preferred Stock

Preferred stock that includes dividends in arrears which must be paid before common stock dividends.

Par Value

Legal capital of the stock, serving little real purpose in modern finance.

Market Value

The price an investor can buy or sell one share of the stock for.

Return on Equity (ROE)

A measure of profitability related to stockholder investment, calculated as (Net Income - Preferred Dividends)/Average Common Stockholders' Equity.