accounting ch 10 STOCKS

stockholders equity

residual value of a companies assets after deducting its liabilities

includes capital stock, retained earnings, and treasury stock

capital stock

amount of common and preferred stock that a company is authorized to issue

preferred stock

low risk, estimated return, % * par value

common stock

every company has this as default, higher risk but higher reward, NO guaranteed return

retained earnings (or deficit)

a companys cumulative net earnings or profits after accounting for dividends, goes on SORE

treasury stock (share repurchases)

shares that were once outstanding but were later repurchased by the company

company repurchases its own stock to boost financial metrics, lower dividends, lower taxes, have more cash, etc.

authorized shares

the MAX number of shares a company may issue in each class of stock, specified in the companys charter

issued shares

the number of shares issued/sold to stockholders

outstanding shares

number of shares owned by stockholders

benefits of common stock

1. voting in election of board of directors

2. sharing profits and dvds of company

3. can buy new issues of stock first

4. share distribution of companys assets during liquidation

stock split

increasing number of outstanding shares a company has while decreasing the price per share

par value is changed in reverse proportion

no je required

stock apprecaition

if value of stock increases over the price initially paid

dividends

payments to a company’s stockholders from earnings (cash or noncash)

ALWAYS reduces retained earnings

benefits of preferred stock

1. generally pays a regular dvd (% of par value)

2. generally less risky

3. receive priority over common stockholders in pmt of dvds and distribution of assets

par value

arbitrary monetary amount printed on each share of stock that establishes a minimum price for the stock when issued but does not determine its market value

additional paid in capital

the amount recieved in excess of the par value

capital stock

the portion of the corporations stockholders equity contributed by investors (owners) in exchange for shares of stock

stock repurchases

reduces equity

does NOT increase investments

cash dividends

payment of this is preceded by an official announcement by board of directors

dividend declaration specifies

1. declaration date

2. dollar amt of dvd

3. date of record

4. pmt date

declaration date

date on which a corporation announces its intent to pay a dvd

date of record

date on which a stockholder must own share of stock to receive a dvd

stock dividends

transfers shares of stock from corporation to its stockholders- additional shares of the corporations own stock

earnings per share (eps)

ratio of earnings (net income) to shares outstanding (weighted avg number of shares outstanding)

net income/ weighted avg number of shares outstanding (WACS)