Characteristics of Corporations
A legal entity that is separate from its owners, with continuous and unlimited life.
What is a corporation?
The distribution of a corporation's profits or shareholders
What are dividends?
The cumulative total of a corporation's profits (less losses and declared dividends) that represent the shareholders claim on the company’s assets
What are retained earnings?
The number of shares a company is permitted to issue
What is authorized share capital?
This type of corporation has shares traded on a stock exchange.
What is a public corporation?
No journal entry is required on this dividend date.
What is the record date?
Shows the changes in retained earnings during the year
What is the statement of retained earnings?
Preferred shares that can be exchanged for common shares.
What are convertible preferred shares?
This Characteristic is a set of specific laws that govern operations of corporations
What is government regulation?
Unpaid cumulative preferred dividends from previous years
What are dividends in arrears?
Measure of profitability that evaluates how many dollars are earned for each dollar invested by shareholders
What is return on equity?
Corporation has a profit of $40,000 on Dec 31, 2025, and an average shareholder’s equity of $200,000. What is the ROE?
What is 20%?
The advantage that allows corporations to raise large amounts of money by selling shares
What is the ability to acquire capital?
The three important dates associated with a cash dividend
What are the declaration date, record date, and payment date?
Corporation has retained earnings of $50,000 on Jan 1 2025, earns a profit of $15,000 during the year, and declares dividends of $4000. What is the retained earnings balance on Dec 31, 2025?
What is the ending retained earnings of $61,000?
A corporation earned a net income of $75,000 during the year. Average shareholders’ equity was $300,000. Calculate the Return on Equity (ROE)
What is 25%?