Chap 11 Flashcards Preview

Financial accounting > Chap 11 > Flashcards

Flashcards in Chap 11 Deck (22):
1

Corporation

a business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock.
-publicly or privately held

2

characteristics of a corp (9)

1. separate legal existence
2. limited liability of stockholders -- fraud is the exception
3. transferable ownership rights
4. ability to acquire Capital
5. continuous life - perpetual or limited
6. corporate management (ceo, cio, cfo, etc)
7. government regulations - federal security laws
8. additional taxes - corporate net income
9. other forms of business organization - S corporation, LLCs, LLPs

3

what does a corporation need in order to establish itself?

by-laws

4

commonstock

ownership in the corp

5

stock certificate

proof of stock ownership that shows the same of both corporation and stockholder, class/ special features of stock, number of shares owned and signatures of corporate officers

6

authorized stock

charter states number of shares a company can sell

7

issuance of stock

directly or indirectly to investors through investment banking firms

8

par and no-par value stocks

par value is an assigned value per share

9

accounting for common stock issues

1. paid in capital 2. retained earnings

10

treasury stock

corporation's own stock tat has been issued, fully paid for and reacquired by the corporation

11

purchase of treasury stock

accounted for by the cost methoc

12

preferred stock

contractual provisions that give it preferences

13

dividend preferences

share in distribution of corporate income before common stockholders

14

cumulative dividend

must be paid before common stockholders

15

dividends in arrears

when preferred dividends are not declared they are still owed before common stockholders will receive anything

16

liquidation preference

a value assigned

17

dividends

a distribution by a corporation to its stockholders on a pro rata basis

18

cash dividends (3)

1. retained earnings
2. adequate cash
3. declared dividends

19

stock dividends

pro rata distribution of the corporation's own stock to stockholders - more stocks are outstanding

20

stock spilts

issuance of additional shares of stock to stockholders according to their percentage ownership

21

retained earnings

is net income that a company retains in the business

22

debt v. equity decision

issue stock (and share ownership) or borrow money to raise funds