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Principles of Financial Accounting
Chapter 12
33
Accounting
Undergraduate 2
05/05/2011

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Term
Articles of Incorporation
Definition
An official document filed with and approved by a state that authorizes the incorporators to do business as a corporation.
Term
Authorized shares
Definition
The maximum number of shares a corporation can issue without a change in its state charter.
Term
Callable preferred stock
Definition
Preferred stock that the issuing corporation can redeem or retire at a stated price.
Term
Common stock
Definition
Shares of stock that carry voting rights but that rank below preffered stock in terms of dividends and the distribution of assets.
Term
Convertible preferred stock
Definition
Preferred stock that the owner can exhange for common stock.
Term
Cumulative preferred stock
Definition
Preferred stock on which unpaid dividends accumulate over time and that must be satisfied before a dividend can be paid to common stockholders.
Term
Date of payment
Definition
The date on which a dividend is paid.
Term
Declaration date
Definition
The date on which a board of directors declares a dividend.
Term
Dividend
Definition
A distribution of a corporation's assets (usually cash generated by past earnings) to its stockholders.
Term
Dividends in arrears
Definition
Past dividends on cumulative preferred stock that remain unpaid.
Term
Double taxation
Definition
Taxation of corporate earnings twice - once as income of the corporation and once as income to stockholders in the form of dividends.
Term
Ex-dividend
Definition
A description of stock between the record date and the date of payment, during which the right to the dividend remains with the person who owned the stock on the record date.
Term
initial public offering (IPO)
Definition
A company's first issue of capital stock the the public. (Decision Point)
Term
Issued shares
Definition
The shares of stock sold or otherwise transferred to stockholders.
Term
Legal capital
Definition
The number of shares of stock issued times the par value; the minimum amount a corporation can report as contributed capital.
Term
Liquidating dividend
Definition
A dividend that exceeds retained earnings and that a corporation usually pays only when it is going out of business or reducing its operations.
Term
Noncumulative preferred stock
Definition
Preferred stock that does not oblige the issuer to make up a missed dividend in a subsequent year.
Term
No-par stock
Definition
Capital stock that does not have a par value.
Term
Outstanding shares
Definition
Shares that have been issued and that are still in circulation.
Term
Par value
Definition
An arbitrary amount assigned to each share of stock; constitutes a corporation's legal capital.
Term
Preferred stock
Definition
Stock that has preference over common stock, usually in terms of dividends and the distribution of assets.
Term
Record date
Definition
The date on which ownership of stock, and thus the right to receive a dividend, is determined.
Term
Residual equity
Definition
The equity of common stockholders after all other claims have been satisfied.
Term
Share of stock
Definition
A unit of ownership in a corporation.
Term
Start-up and organization costs
Definition
The costs of forming a corporation.
Term
Stated value
Definition
A value that a board of directors assigns to no-par stock.
Term
Stock certificates
Definition
Documents issued to stockholders showing the number of shares that they own.
Term
Stock option plans
Definition
Plans that give employees the right to purchase their companies' stock under specified terms.
Term
Treasury stock
Definition
Capital stock, either common or preferred, that the issuing company has reacquired and has not subsequently resold or retired.
Term
Underwriter
Definition
An intermediary between the coporation and the investing public who facilitates an issue of stock or other securities for a fee.
Term
Dividends yield
Definition
Current return to stockholders in the form of dividends; Dividends per Share ÷ Market Price per Share.
Term
Price/earnings (P/E) ratio
Definition

A measure of confidence in a company's future;

Market Price per Share ÷ Earnings per Share.

Term
Return on equity
Definition

A measure of management's performance;

Net Income ÷ Average Stockholders' Equity.

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