Chapter 11: Corporations: Organization, Stock Transactions, and Stockholders’ Equity

Flashcards to help review Chapter 11: Corporations: Organization, Stock Transactions, and Stockholders’ Equity. These flashcards include vocabulary terms and definitions.

Corporation

An entity created by law that is separate and distinct from its owners.

Publicly held corporation

May have thousands of stockholders, and its stock is regularly traded on a national securities exchange.

Privately held corporation

Usually has only a few shareholders, and does not offer its stock for sale to the general public.

Organization costs

Costs incurred in forming a corporation; include legal and state fees and promotional expenditures and are expensed as incurred.

Authorized Stock

The amount of stock that a corporation is authorized to sell as indicated in its charter.

Par value stock

Capital stock to which the charter has assigned a value per share.

No-par value stock

Capital stock to which the charter has not assigned a value.

Paid-in capital

The total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.

Retained earnings

Net income that a corporation retains for future use.

Treasury stock

A corporation’s own stock that has been issued, fully paid for, and reacquired from shareholders but not retired.

Cash dividend

A pro rata (proportional to ownership) distribution of cash to stockholders.

Stock dividend

A pro rata (proportional to ownership) distribution of the corporation’s own stock to stockholders.

Small stock dividend

Stock dividend less than 20–25% of the corporation’s issued stock, recorded at fair market value

Large stock dividend

Stock dividend greater than 20–25% of issued stock, recorded at par value

Stock split

Involves the issuance of additional shares to stockholders according to their percentage ownership and a reduction in the par or stated value per share; increases number of shares outstanding and reduces the market value of shares.

Payout Ratio

Measures the percentage of earnings a company distributes in the form of cash dividends to common stockholders.