- accounting entity concept
- concept indicating that the financial activity of an entity (corporation) must be kept separate from that of the owners
- additional paid-in capital
- account for recording excess of the proceeds received from the issuance of the stock over the stock’s par value
- appropriated retained earnings
- portion of a company’s retained earnings designated for a particular purpose such as future expansion, special projects, or as part of a company’s risk management plan
- articles of incorporation
- (also, charter) define the basic structure and purpose of a corporation and the amount of capital stock that can be issued or sold
- authorized shares
- maximum number of shares that a corporation can issue to investors; approved by state in which company is incorporated and specified in the corporate charter
- brokers
- buy and sell issues of stock on behalf of others
- capital
- cash and other assets owned by a company
- cash dividend
- corporate earnings that companies pass along to their shareholders in the form of cash payments
- common stock
- corporation’s primary class of stock issued, with each share representing a partial claim to ownership or a share of the company’s business
- contributed capital
- owner’s investment (cash and other assets) in the business, which typically comes in the form of common stock
- corporation
- legal business structure involving one or more individuals (owners) who are legally distinct (separate) from the business
- date of declaration
- date upon which a company’s board of directors votes and decides to give a cash dividend to all the company shareholders; the date on which the dividends become a legal liability
- date of payment
- date that cash dividends are paid to shareholders
- date of record
- date the list of dividend eligible shareholders is prepared; no journal entry is required
- debt-to-equity ratio
- measures the portion of debt used by a company relative to the amount of stockholders’ equity, calculated by dividing total debt by total equity
- deficit in retained earnings
- negative or debit balance
- dividend smoothing
- practice of paying dividends that are relatively equal period after period even when earnings fluctuate
- double taxation
- occurs when income is taxed to the corporation that earned the income, and then taxed again to stockholders when they receive a distribution of the corporation’s income as dividends
- earned capital
- capital earned by the corporation as part of business operations
- earnings per share (EPS)
- measurement of the portion of a corporation’s profit allocated to each outstanding share of common stock
- ex dividend
- status of stock sold between the record date and payment date during which the investor is not entitled to receive dividends
- going concern assumption
- absent any evidence to the contrary, assumption that a business will continue to operate in the indefinite future
- incorporation
- process of constituting a company into a legal entity
- initial public offering (IPO)
- when a company issues shares of its stock to the public for the first time
- investment banker
- financial professional who provides advice to companies wishing to issue new stock, then purchase the stock from the company issuing the stock and resell the securities to the public
- issued shares
- authorized shares that have been sold to shareholders
- large stock dividend
- stock dividend distribution that is larger than 25% of the total outstanding shares just before the distribution
- market value of stock
- price at which the stock of public companies trades on the stock market
- no-par stock
- stock issued with no par value assigned to it in a corporate charter
- organization costs
- costs of organizing the corporate entity that include attorney fees, promotion costs, and filing fees paid to the state
- outstanding shares
- shares that have been issues and are currently held by shareholders
- owners’ equity
- business owners’ share of the company
- par value
- value assigned to stock in the company’s charter and is typically set at a very small arbitrary amount; serves as legal capital
- preemptive right
- allows stockholders the option to maintain their ownership percentage when new shares of stock are issued by the company
- preferred stock
- type of stock that entitles the holder to unique preferences that are advantageous over common stock features
- prior period adjustments
- corrections of errors that occurred on previous periods’ financial statements
- private corporation
- corporation usually owned by a relatively small number of investors; shares are not traded publicly, and the ownership of the stock is restricted to only those allowed by the board of directors
- property dividend
- stock dividend distribution of assets other than cash
- publicly traded company
- company whose stock is traded (bought and sold) on an organized stock exchange
- restatement
- correction of financial statement amounts due to an accounting error in a prior period
- restricted retained earnings
- portion of a company’s earnings that has been designated for a particular purpose due to legal or contractual obligations
- reverse stock split
- issuance of new shares to existing shareholders in place of the old shares by decreasing the number of shares and increasing the par value of each share
- secondary market
- organized market where previously issued stocks and bonds can be traded after they are issued
- Securities and Exchange Commission (SEC)
- federal regulatory agency that regulates corporations with shares listed and traded on security exchanges through required periodic filings
- small stock dividend
- stock dividend distribution that is less than 25% of the total outstanding shares just before the distribution
- special dividend
- one-time extra distribution of corporate earnings to shareholders, usually stemming from a period of extraordinary earnings or special transaction, such as the sale of a company division
- stated value
- is an amount a board of director’s assigns to each share of a company’s stock; functions as the legal capital
- statement of stockholders’ equity
- provides the changes between the beginning and ending balances of each of the stockholders’ equity accounts during the period
- stock discount
- amount at which stock is issued below the par value of stock
- stock dividend
- dividend payment consisting of additional shares rather than cash
- stock split
- issuance of new shares to existing shareholders in place of the old shares by increasing the number of shares and reducing the par value of each share
- stock trading
- buying and selling of shares by investors and brokers
- stockholder
- owner of stock, or shares, in a business
- treasury stock
- company’s own shares that it has repurchased from investors