Characteristics of Corporations
This means a corporation is legally separate from its owners.
What is separate legal existence?
Ownership rights in a corporation are represented by these.
What are shares?
Preferred shareholders have priority for these before common shareholders.
What are dividends?
The cumulative profit less losses and dividends since incorporation.
What are retained earnings?
This profitability ratio measures how many dollars are earned for each dollar invested by shareholders.
What is Return on Equity (ROE)?
Shareholders can only lose this amount if the corporation fails.
What is their investment in the corporation?
Shareholders elect this group to manage the corporation.
What is the Board of Directors?
These preferred shares receive current and past unpaid dividends before common shareholders.
What are cumulative preferred shares?
This account records taxes on a corporation’s income statement.
What is Income Tax Expense?
This characteristic allows a corporation to continue even if ownership changes.
What is continuous and unlimited life?
The maximum number of shares a company is allowed to sell.
What is authorized share capital?
Unpaid cumulative dividends are known as this.
What are dividends in arrears?
This liability account appears on the balance sheet for taxes owed.
What is Income Tax Payable?
These documents act as the corporation's constitution.
What are articles of incorporation?
The first public sale of shares.
What is an Initial Public Offering (IPO)?
Preferred shares that can be exchanged for common shares.
What are convertible preferred shares?
The two major components affecting retained earnings.
What are profits and dividends?
Costs of forming a corporation that must be expensed when incurred.
What are organization costs?
Share capital is considered this type of capital and cannot be distributed as dividends.
What is legal capital?
These preferred shares are often reported as liabilities because they resemble debt.
What are redeemable or retractable preferred shares?
This statement shows changes in retained earnings during the year.
What is the Statement of Retained Earnings?