ACCT201 Heller Fall 2024 FINAL Financial Account Ch13-17 vocab

Common stock

• Shares in a company

• Shareholders have voting rights(for owners)

• Dividend is variable

Preferred stock

• Shares in a company

• Sometimes distributed to employees as part of a bonus

• Dividend will be fixed

Book value per share equation

Total Stockholder’s Equity / # of shares outstanding

Authorized shares

Amount of shares the gov allows company to issue, written in the company’s charter

Outstanding shares

Amount of already-issued shares held by stockholders

Treasury Stock account type

Contra capital account

Why a corporation buy back its own shares

1. Future dist. to key employees

2. Reduces # of shares outstanding, increasing earnings per share

3. So it has shares to acquire another company(trade)

4. Prevent a hostile takeover(51%)

5. Shares bought back at M.P., resold for profit, aka making money on their own company

Closing Entries

1. Close Revenue to Income Summary

2. Close Expenses to Income Summary

3. Close Income Summary to Retained Earnings

4. Close Dividends to Retained Earnings(Stockholders Equity column)

Undervalued stock

Book Value is less than market value

Overvalued Stock

Book value is less than market value

Par

$1000

Publicly traded

• can be traded on NASDAQ or New York Stock Exchange

• Public can buy and sell stock

Privately held

No forum to buy or sell

Par definition

Original market price after entering NASDAQ/ going public for the first time

IPO (Initial Public Offering)

• forum where shares of company are offered in the public fro the 1st time

• An IPO where new companies go to get new buyers

Goal for non-profits

goal is to only make as much money as they need

Goal for for-profits

goal is net income

2 ways to make $ at the stock market

1. Dividends(taxed)

2. Capital gains(buy low, sell high)

When you buy stock in a corportaion, you

buy ownership

Definition of a corporation

A corporation is a separate legal entity from its owners

Double taxation

Corporations pay income tax, owners of corp who get dividends also pay tax

Sub S-corporations

Corporations that have 75 or fewer owners

Fiscal year end 12/31

Sub C-corporations

Corporations that have 75 or more owners

Any fiscal year end