Term
| Benefits of owning common stock |
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Definition
1) voice in management
2) dividends
3) residual claim |
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Term
| Authorized Number of Shares |
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Definition
| the maximum number of shares of a corporation's capital stock that can be issues as specified in the charter |
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Term
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Definition
| stock that has been sold to the public |
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Term
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Definition
| the total number of shares of stock that are owned by stockholders on any particular date |
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Term
| Typical Organizational Structure of a Corporation |
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Definition
| Stockholders (owners of voting shares) -elect- Board of Directors (Internal managers and external nonmanagers) -appoints- President -employs- Vice Presidents (of Production, Marketing, Finance, Controller) |
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Term
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Definition
| Authorized shares -> Issued shares -> Stock Market -> Repurchased shares -> Held as Treasury Stock |
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Term
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Definition
Net Income/Average Number of Common Shares Outstanding
Measures how well the company is performing |
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Term
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Definition
| the basic voting stock issued by a corporation |
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Term
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Definition
| the nominal value per share of capital stock specified in the charter; serves as the basis for legal capital |
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Term
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Definition
| the permanent amount of capital defined by state law that must remain invested in the business; serves as a cushion for creditors |
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Term
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Definition
| capital stock that has no par value specified in the corporate charter |
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Term
| Initial Public Offering (IPO) |
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Definition
| the very first sale of a company's stock to the public (when the company first "goes public") |
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Term
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Definition
| additional sales of new stock to the public once a company's stock has been traded on established markets |
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Term
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Definition
| a corporation's own stock that has been issued but subsequently reacquired and is still being held by that corporation |
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Term
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Definition
Dividends per Share/Market Price per Share
Measures the return on investment based on dividends |
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Term
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Definition
| the date on which the board of directors officially approves a dividend |
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Term
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Definition
| the date on which the corporation prepares the list of current stockholders as shown on its records; dividends can be paid only to the stockholders who own stock on that date |
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Term
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Definition
| the date on which a cash dividend is paid to the stockholders of record |
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Term
| Sufficient Retained Earnings |
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Definition
| retained earnings needed to cover the amount of the dividend |
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Term
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Definition
| cash needed to pay the dividend and meet the operating needs of the business |
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Term
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Definition
| the date two days before the date of record; stock prices often fall on this date |
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Term
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Definition
| a distribution of additional shares of a corporation's own stock |
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Term
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Definition
| an increase in the total number of authorized shares by a specified ratio; it does not decrease retained earnings |
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Term
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Definition
| stock that has specified rights over common stock |
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Term
| Significant Differences between preferred stock and common stock |
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Definition
1) Preferred Stock does not grant voting rights
2) Preferred Stock is less risky
3) Preferred stock typically has a fixed dividend rate |
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Term
| Current Dividend Preference |
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Definition
| the feature of preferred stock that grants priority on preferred dividends over common dividends |
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Term
| Cumulative Dividend Preference |
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Definition
| the preferred stock feature that requires specified current dividends not paid in full to accumulate for every year in which they are not paid. these cumulative preferred dividends must be paid before any common dividends can be paid |
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Term
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Definition
| dividends on cumulative preferred stock that have not been declared in prior years |
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Term
| Effect on Cash Flow of Issuance of Capital Stock |
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Definition
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Term
| Effect on Cash Flow of Purchase of Treasury Stock |
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Definition
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Term
| Effect on Cash Flow of Sale of Treasury Stock |
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Definition
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Term
| Effect on Cash Flow of Payment of Cash Dividends |
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Definition
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Term
| Journal Entry for the issuance of shares |
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Definition
Debit Retained Earnings
Credit Common Stock |
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Term
| Journal Entry for the purchase of treasury stock |
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Definition
Debit Treasury Stock
Credit Cash |
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Term
| Journal Entry for the sale of treasury stock above purchase price |
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Definition
Debit Cash
Credit Treasury Stock
Credit Capital in Excess of Par |
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Term
| Journal Entry for the sale of treasury stock below purchase price |
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Definition
Debit Cash
Debit Capital in excess of par
Credit Treasury Stock |
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