Chapter 11_Notes - Chapter 11 18/02/2009 19:06:00 Learning...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 11 18/02/2009 20:06:00 Learning objective 1- to explain the role of stock in the capital structure of  a corporation. Benefits of corporate form of organztiona simple to become owner easy to transfer ownership limited liability characteristics can own assets incur liabilities sue and be sued enter into contracts ownership of corporation ultimate control is with stockholders o elect board of directors and vote on managemnt issues o board of directos hire exectuvei officers o others are then employeed to hire others authorized, issued, and outstanding capital stock authorized shares – maximum number of shares of capital stock that can be  sold to the public o identified in corporate charter of the state authoizzed shares are either issued or unissued o issued shares are shares that have been sold to the public
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
o unissued shares are authorized share that have not been sold to the  public issued shares can be outstanding or treasury shares o outstanding shares are shrase that have been issued and are currently  owned by stockholders o treatsury shares are issued shares that have been repurchased by the  corportation Learning objective 2 - analyze the earnings per share ratio. Earnings per share ratio = net income / average nmber of shares outstanding a measure of the company’s ability to produce income for each common  share outstanding Learning objective 3 - to describe the characteristics of common stock and  analyze transactions affecting common stock. Two types of capital stock = common stock and preferred stock Common stock     Common stock is the basic voting stock Represents residual claim on assets in liquidation Dividends paid must first satisfy preferred stock agreements before any  distribution can be made to common stockholders. Ranks after preferred stock Dividend set by board of directors Common stock has a par value which is a very small amount o It is the legal capital that is required by the state to remain invested in  the business o Par value is a nominal amount and is not related to the market value of  the share of stock o Some states do not require a parvalue to be stated in the charter
Background image of page 2
Accounting for capital stock Two primary sources of equity: contributed capital and retained earnings Contribute capital has two accounts o common stock, par value o capital in excess of par value o both represtent the amount the shareholders have invested by buying  shraes of stcok from the company retained earnings – reports cumulative amount of net income the corporation 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 11

Chapter 11_Notes - Chapter 11 18/02/2009 19:06:00 Learning...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online