Shareholder's Equity Vocabulary Flashcards

Vocabulary flashcards based on lecture notes covering shareholder's equity concepts, share types, retirement accounting, retained earnings restrictions, dividend classifications, and stock splits.

Equity

The residual interest in net assets, representing what is left when liabilities are subtracted from assets.

Common shares

Shares that provide the right to receive residual interest in the equity of the company upon dissolution.

Preferred shares

Shares that usually have a priority claim over dividends declared.

Restricted shares

Common shares that have limited or no voting rights.

Authorized share capital

The maximum number of shares that can be legally issued by a corporation.

Issued share capital

The number of shares that have been issued to shareholders to date, including those owned by the corporation.

Outstanding share capital

The number of shares that have been issued and are currently owned by shareholders.

Treasury shares

Shares reacquired by the corporation and held pending resale, which are issued but not outstanding.

Subscribed shares

Unissued shares set aside to meet subscription contracts.

Normal course issuer bid

A plan that must be filed with relevant securities commissions by corporations intending to buy back their own shares.

Deficit

The condition where accumulated losses and distributions exceed accumulated gains.

Appropriated retained earnings

Entries that divide existing retained earnings into multiple accounts to restrict dividend payments as a result of discretionary management action.

Restricted retained earnings

Retained earnings that are transferred to an appropriated retained earnings account as a result of a legal contract.

Declaration Date

The date on which a corporation's board of directors formally announces a dividend and a liability is recognized.

Record date

The date on which the list of shareholders of record who will receive the dividend is prepared.

Ex-Dividend Date

The day after the record date; an investor who holds shares on or after this date does not receive the dividend.

Payment Date

The date on which dividend payments are made and the liability initially recorded is debited.

Partially participating preferred shares

Preferred shares that may participate in dividend declarations in excess of their preference rate.

Fully participating shares

Shares that share in the full extent of dividend declarations.

Property Dividends

Dividends paid with non-cash assets.

Liquidating dividends

Distributions that are a return of the amount received when shares were issued, rather than assets acquired through earnings.

Scrip Dividends

Dividends declared by a company experiencing a temporary cash shortage in order to maintain a continuing dividend policy.

Stock Dividend

A proportional distribution to shareholders of additional shares of the corporation that only increases the number of shares outstanding.

Dividend Reinvestment Plan (DRIP)

A plan that allows shareholders to reinvest their dividends into additional shares of the entity.

Fair Value Method

An accounting method for stock dividends where the fair value of stock dividends is measured based on the market price per share on the declaration date.

Stock splits

A proportional increase in the number of shares outstanding with no change in the recorded capital accounts.

Reverse split

A proportional reduction in the number of shares issued and outstanding.