Term
| Stockholders equity (also called shareholders equity or owners equity) |
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Definition
| is the owners claim to the net assets (i.e assets minus liability) of a corporation. 5 major components in the balance sheet: Capital stock also called legal capital, additional paid in capital, retained earnings or deficit and accumulated other comprehensive income and treasury stock which is accounted for differently depending on the method used by the company. |
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Term
| Capital stock - legal capital defination |
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Definition
| is the amount of capital that must be retained by the corp for the protection of the creditors. |
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Term
| Capital stock - legal capital: Par Value |
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Definition
| preferred stock is issued with a par value, but common stock may be issued without a par value. Any excess of the actual amount received over the par or stated value of the stick is accounted for as additionally paid in capital. |
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Term
| Capital stock - legal capital: Authorized, issued and outstanding |
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Definition
| A corp charter contains the amounts of each class of stock that it may legally issue and this is called authorized capital stock. when part of all of the authorized capital stock is issued it is called issued capital stock. because a corp may own issued capital stock in the form of treasury stock, the amount of issued capital stock in the hands of shareholders is called "outstanding" capital stock. The # of shares of each stock authorized, issued and outstanding must be disclosed. |
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Term
| Capital stock - legal capital: Common stock |
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Definition
| Common stock is the basic ownership interest in a corp. CSH bear the ultimate risk of loss and receive the ultimate benefits of success, but they are not guaranteed dividends or assets upon dissolution. CSH generally control management. They have the right to vote, the right to share in earnings of the corp. and the right to share in assets upon liquidation after satisfaction of creditors' claims and those of preferred shareholders. |
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Term
| Common shareholders may have preemptive rights to a proportionate share of any additional common stock issued |
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Definition
| if granted in the articles of incorporation. |
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Term
| Book Value per common share |
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Definition
= Commonshareholder's equity/ commonshares outstanding.
Book value per common share measures the amount that common shareholders would receive for each share if all assets were sold at their book (carrying value) and all creditors were paid. |
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Term
| Common stockholder's equity formula |
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Definition
| Total shareholder's equity - preferred stock outstanding (at grater of call price or par value)- cumulative preferred dividends in arrears = common shareholders equity. step 2: book value per common share. |
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Term
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Definition
| is an equity security with preferences and features not associated with common stock. preferred stock may include a preference related to dividends, which may be cumulative or non cumulative and participating or non participating. |
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Term
| The US Treasury bill is considered to be a cash equivalent item so purchasing the T-bill |
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Definition
| merely changes the form of cash held, it does not change the cash position of the entity. Thus the purchase is not reported on the Statement of cash flow. |
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Term
| A reconciliation of ending Retained earnings to net cash flow from operations is |
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Definition
| not disclosed on the statement of cash flows either on the direct or indirect method, nor is it shown in a separate schedule. Instead the reconciliation is from net income to net cash from operations. |
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Term
| investing activity includes |
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Definition
| acquisitions and sales of long term assets or investment assets. |
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Term
| Conversion of debt to equity should be |
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Definition
| disclosed as supplemental information in the statement of cash flow. |
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Term
| cash flow per share should |
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Definition
| not be disclosed in the statement of cash flow. |
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Term
| financial statements should |
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Definition
| not report an amount of cash flow per share. Neither cash flow nor any component of it is an alternative to net income as an indicator of an enterprises performance, as reporting per share amounts might imply. |
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Term
| The primary purpose of a statement of cash flow is to |
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Definition
| provide relevant information about the cash receipts and cash disbursements of an enterprise during and accounting period. |
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Term
| In a statement of cash flows, if used equipment is sold at a gain, the amount shown as inflow from investing activties |
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Definition
| equals the carrying amount of the equipment plus the gain. |
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Term
| cash payments made to reduce debt principal are properly reported as a |
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Definition
| financing activity. Cash interest payments would be reported as a component of cash from operating activities. |
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Term
| amortization of bond discount is an income related item, this it is |
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Definition
| almost automatically an operating activity. because the amortization of the discount was originally subtracted to get to net income in the first place, it is added back to net income for an indirect method statement of cash flow. |
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Term
| Financing activities include |
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Definition
| the cash effects of transactions obtaining resources from owners and providing them with a return on their investment. |
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Term
| the operating activities section includes cash flows |
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Definition
| from working capital current asset ad current liability and other income statement items. Under the indirect method net income is adjusted for noncash items and increase/decrease in working captial items to arrive at net cash from operating activites. increase in CA and decrease in CL are uses of cash while decrease in CA and increase in CL increase cash |
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