Bus 212 - Week 5 - Contributed Capital

These flashcards cover key concepts and vocabulary associated with contributed capital and corporate structures in finance.

Contributed capital

The total amount of cash or other assets contributed by stockholders in exchange for shares of stock.

Retained earnings

The earnings of the corporation since its inception, less any losses, dividends, or transfers to contributed capital.

Preferred stock

A type of stock that gives shareholders preference over common stockholders, often with no voting rights.

Common stock

A unit of ownership in a corporation that typically includes voting rights.

Treasury stock

Shares of the corporation’s own stock that it has bought back in the open market.

Dividend distribution

A payment made by a corporation to its shareholders, typically from retained earnings.

Voting rights

The rights of shareholders to vote on matters such as the election of the Board of Directors.

Preemptive right

The right of existing shareholders to maintain their percentage of ownership by purchasing additional shares before the company offers them to others.

Authorized shares

The total amount of shares a corporation is allowed to issue as defined in its articles of incorporation.

Issued shares

The actual number of shares that have been issued to shareholders.

Outstanding shares

The shares that are currently held by all shareholders, excluding treasury shares.

Par value

The nominal value of a security stated by the issuer, often used as a base for calculating the minimum price at which shares can be issued.

Additional paid-in capital

The amount received from shareholders in excess of the par value of the stock.

Stockholder equity

The owners’ claims on the net assets of the corporation, consisting of contributed capital and retained earnings.

Cash dividend requirements

1) Adequate retained earnings; 2) Adequate cash; 3) Declaration by the Board of Directors.

Corporate characteristics

Legal existence separate from owners, limited liability, transferable ownership rights, the ability to acquire capital, and continuous life.

Accounting for stock issuance

Recording the transaction when stocks are sold, affecting cash and stockholder equity accounts.