Corporations
Who are the owners of a corporation?
Stockholders
Corporations are created by filing a certification of formation with who?
The state.
T/F: A sole proprietorship can issue stock.
False
What does it mean to issue stock at premium?
Issue the stock at a price above par value
Common stock is which type of account on the balance sheet?
Stockholder's equity
How do corporations raise money?
Through an initial public offering (IPO).
What is the paper evidence of a corporation?
Stock Certificate
Dividends
T/F: Common stockholders have voting rights.
True
What does EPS represent?
Net income per share of common stock
How are corporations taxed?
Through double taxation (both the corporation and the stockholder pays a tax on the dividend).
What are authorized shares?
The number of shares the state allows the corporation to issue to investors.
What is stock that what issued to shareholders and then bought back by the company?
Treasury Stock
Who gets paid first, preferred stockholders or common stockholders?
Preferred Stockholders
What are the three types of stock?
Common, Preferred, Treasury
Corporations have limited liability. What is meant by this?
Stockholder's personal debts cannot be affected (their maximum loss is their investment).
Stock in the hands of shareholders
Outstanding shares
What is the par value of stock?
It is up to each corporation and it is an arbitrary number.
A dividend that does not distribute any assets.
Stock dividend (distributes shares)
What is the equation for EPS?
(Net income - preferred dividends)/average number of common shares outstanding
Define a corporation.
A business organized that is a separate legal entity (organized independently of its owners).
Explain the difference between issued shares and outstanding shares.
Issued shares - any share actually issued (but may not be in hands of shareholders)
Outstanding shares - actually in shares
What is the different between a small stock dividend and a large stock dividend?
Small- less than 25% of issued and outstanding stock
Large- greater than 25% of issued and outstanding stock
What is the difference between Paid-In Capital and Retained Earnings?
Paid-in capital: amounts contributed by shareholders
Retained earnings: earned by the corporation
What is the Price-Earnings ratio?
Market price of stock / EPS