paid in capital
amount stockholders have invested in the company
retained earnings
amount of earnings the corporation has kept or retained; earnings not paid out by dividends
treasury stock
corporation's own stock that it has reacquired
invested capital
amount of money paid into a company by its owners
corporation
entity that is legally separate from its owners and even pays its own income taxes
Model Business Corporation Act
serves as a guide to states in the development of their corporate statutes
articles of incorporation
describe (a) the nature of the firms business activities, (b) the shares of stock to be issued, and (c) the initial board of directors
organization chart
tracing the line of authority for a typical corporation
angel investors
wealthy individuals in the business community willing to risk investment funds on a promising business venture
venture capital firms
provide additional financing, often in the millions, for a percentage ownership in the company
initial public offering
first time issuance of stock to the public
publicly held corporation
trades on NYSE or NASDAQ or by OTC trading
privately held corporation
does not allow investment by general public and normally has fewer stockholders than a public corporation
limited liability
guarantees that stockholders in a corporation lose no more than the amount they invested in the company, even in the event of bankruptcy
mutual agency
means the individual partners in a partnership each have the power to bind the business to a contract
double taxation
as a legal entity separate from its owners; a corporation pays income taxes on its earnings
S corporation
allows a company to enjoy limited liability as a corporation, but tax treatment as a partnership
authorized stock
total number of shares available to sell, stated in the company's articles of incorporation
issued stock
number of shares that have been sold to investors
outstanding stock
number of shares held by investors
par value
legal capital per share of stock that is assigned when the corporation is first established
no par value stock
common stock that has not been assigned a par value. Most new corporations and even some established corporations issue no-par value common stock.
stated value
treated and recorded in the same manner as par value shares
Additional Paid In Capital
credited for a portion of cash proceeds above par value
preferred stock
1) usually holds first rights to a specified amount of dividends over common shareholders
2) receive preference over common stockholders in the distribution of assets in the even the corporation is dissolved
convertible preferred stock
allows stockholder to exchange shares of preferred stock for common stock at a specified conversion ratio
redeemable preferred stock
allows preferred stockholders the option, under specified conditions, to return on their shares for a predetermined redemption price
cumulative preferred stock
unpaid dividends accumulate and the firm must pay them in a later year before paying any dividends on common stock
dividend in arrears
Unpaid dividend on cumulative preferred stock; must be paid before any regular dividends on preferred stock and before any dividends on common stock.
treasury stock
corporation's own stock that is has reacquired
accumulated deficit
debit balance in retained earnings
dividends
distributions by a corporation to its stockholders
declaration date
declared by board of directors when dividend is to be paid
record date
declared by board of directors when the company will determine the registered owners of stock and therefore who will receive the dividend
payment date
date of actual cash distribution for stock
stock dividends or splits
when corporations distribute to shareholders additional shares of the companies own stock rather than cash
statement of stockholder's equity
summarizes changes in the balance in each stockholder's equity account over a period of time
return on equity
measures ability of company management to generate earnings from the resources that owners provide
= net income/average stockholder's equity
return on the market value of equity
computed as net income divided by market value of equity.
earnings per share
measures the net income earned per share of common stock
=(net income-dividends on preferred stock)/avg. shares of common stock outstanding
price earnings ratio
indicates how the stock is trading in relationship to current earnings
= stock price/earnings per share
growth stocks
stocks whose future earnings are expected to be higher by investors
value stocks
stocks that are priced low in relation to current earnings