Term
| Advantages of Incorporation |
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Definition
Adv.
Separate Legal Entity
Limited Liability
Ease of Capital Generation
Ease of Transfer of Ownership
Lack of Mutual Agency
Continuous Existence
Centralized Authority and Responsibility
Professional Management |
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Term
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Definition
| An arbitrary amount assigned to each share of stock. |
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Term
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Definition
| Is the number of shares issued times the par value. |
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Term
| Disadvantages of Incorporation |
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Definition
Dis.
Government Regulation
Taxation
Limited Liability
Separation of Ownership and Control |
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Term
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Definition
Pros
Less risky
Cash dividends are not necessary
Maintain or improve the debt to equity ratio |
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Term
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Definition
Cons
Dividends are not tax-deductible.
The issuance of stock dilutes the corporation’s ownership. |
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Term
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Definition
The stockholders’ investments in the
corporation, including Preferred Stock,
Common Stock, and Additional paid-in
capital. |
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Term
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Definition
The earnings of the corporation since its inception, less any losses, dividends, or transfers to contributed capital.
-Retained earnings are reinvested in the business! |
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Term
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Definition
Basic form of stock that a corporation issues.
-Carry voting rights! |
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Term
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Definition
| Give its owners preference over common stockholders, usually in terms of receiving dividends and in terms of claims to assets if the corporation is liquidated! |
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Term
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Definition
Treasury stock is the shares of its own stock that the corporation has bought back on the open market.
The cost of treasury stock is treated not as an investment, but as a reduction in stockholders’ equity! |
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Term
| Write-down (i.e. write-off) |
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Definition
| A reduction in the value of an asset below its carrying value on the balance sheet. |
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Term
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Definition
| The estimated cost of a change in a company’s operations. |
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Term
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Definition
items unrelated to a company’s normal operations.
Appear in a separate section of the income statement.
Including
-discontinued operations
-extraordinary items |
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Term
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Definition
Segments that are no longer part of a company’s operations.
A company may discontinue or dispose of segments that do not fit its future plans or that are unprofitable! |
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Term
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Definition
Events or transactions that are distinguished by their unusual nature and by the infrequency of their occurrence.
Examples of extraordinary items:
-An uninsured loss from flood, earthquake, fire, or theft.
-A gain or loss resulting from the passage of a new law.
-The expropriation (taking) of property by a foreign government. |
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Term
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Definition
| Net Income/ Weighted-Average Common Shares Outstanding |
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Term
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Definition
Refers to items coming from sources other than stockholders and accounting for the change in a company’s equity during an accounting period.
Including: net income, changes in unrealized investment gains and losses, and other items affecting equity (for example, foreign currency translation adjustments) |
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Term
| The Statement of Stockholders’ Equity |
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Definition
| Summarizes changes in the components of the stockholders’ equity section of the balance sheet. |
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Term
| Reasons To Issue Stock Dividends |
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Definition
| Show the success of the company Reduce the market price Increase the contributed capital Short of Cash |
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Term
| Cash-generating efficiency |
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Definition
| A company’s ability to generate cash from its current or continuing operations. |
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Term
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Definition
| Net Cash Flows from Operating Activities/Net Income |
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Term
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Definition
| Net Cash Flows from Operating Activities/ Sales |
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Term
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Definition
| Net Cash Flows from Operating Activities/Average Total Assets |
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