Corporate Finance Concepts

This set of flashcards covers key vocabulary and concepts from Corporate Finance, particularly focused on corporations and stockholder equity.

Corporation

An entity whose existence is separate from its owners.

Stockholders' Equity

Represents shareholders' ownership interest in the corporation's assets.

Treasury Stock

Stock purchased by a corporation of its own shares, recorded as a contra equity.

Dividends

A distribution by a corporation to its shareholders in cash, stock, or noncash assets.

Preferred Stock

A class of stock with preferential treatment in dividends and liquidation.

Common Stock

Stock that has voting rights and represents ownership in a corporation.

Retained Earnings

All net income less dividends over the life of a company.

Stock Split

An increase in the number of shares authorized, issued, and outstanding, proportional decrease in par value.

Paid-In Capital

Funds contributed by stockholders in exchange for shares of ownership.

Initial Public Offering (IPO)

The first sale of stock by a company to the public.

Authorized Shares

The total number of shares a corporation is allowed to issue as determined by the SEC.

Issued Shares

Total number of shares sold to investors.

Outstanding Shares

Total number of shares held by stockholders, not including treasury stock.

Book Value per Share

(Total stockholders’ equity – preferred equity) / Number of shares of common stock outstanding.

Double Taxation

Taxation that occurs both at the corporate level and again at the personal level when dividends are distributed.

Cumulative Preferred Stock

Preferred stock that accrues unpaid dividends.

Return on Equity (ROE)

A measure of profitability that calculates how much profit a company generates with shareholders' equity.