Chapter11 - CHAPTER 11 Reporting and Analyzing Equity...

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Reporting and Analyzing Equity C H A P T E R 11
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Privately Held Privately Held Publicly Held Publicly Held Ownership can be Corporate Form of Organization Existence is separate from owners An entity created by law Has rights and privileges
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Advantages Separate legal entity Limited liability of stockholders Transferable ownership rights Continuous life Lack of mutual agency for stockholders Ease of capital accumulation Disadvantages Governmental regulation Corporate taxation Characteristics of Corporations
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Forming a Corporation Application made to the State Government State Government issues “Charter” and a corporation is formed. Investors purchase corporations stock Stockholders elect Board of Directors “Organization costs”( legal fees promoters fees etc) are expensed as incurred
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C o r p o r a t e O r g a n i z a t i o n C h a r t S e c r e t a r y V i c e P r e s i d e n t F i n a n c e V i c e P r e s i d e n t P r o d u c t i o n V i c e P r e s i d e n t M a r k e t i n g P r e s i d e n t B o a r d o f D i r e c t o r s S t o c k h o l d e r s Ultimate control. Stockholders usually meet once a year. Organizing and Managing a Corporation Selected by a vote of the stockholders. Overall responsibility for managing the company.
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Vote at stockholders’ meetings Sell stock Purchase additional shares of stock Receive dividends, if any Share equally in any assets remaining after creditors are paid in a liquidation Rights of Stockholders
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Each unit of ownership is called a share of stock . A stock certificate serves as proof that a stockholder has purchased shares. Stock Certificates and Transfer When the stock is sold, the stockholder signs a transfer endorsement on the back of the stock certificate. Investment Bankers/ Brokers Registrar Transfer Agents
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Authorized, Issued Outstanding STOCK BASICS Issued OUTSTANDING AUTHORIZED ISSUED
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STOCKHOLDERS’ EQUITY Common Stock, par value $0.05; Authorized: 10,000 shares ; Issued 2,421 shares Outstanding 1,970 shares ……………… 121 Paid-In Capital……………………………. . 7,930 Retained Earnings ………………………. 33,052 Accumulated Other Comprehensive Income 310 Treasury Stock, at cost, 451 shares……. . (16,383) Total Stockholders’ Equity……………… 25,030 STOCK BASICS From Home Depot’s 2006 Annual Report Amounts in millions Authorized, Issued Outstanding
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Par value is an arbitrary amount assigned to each share of stock when it is authorized. Home Depot Inc Par Value $ 0.05 Market price is the amount that each share of stock will sell for in the market. Home Depot Inc Market price _______ Selling (Issuing) Stock No Par stock Stated Value
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typically having priority over common shares in . . . Dividend distributions Distribution of assets in case of liquidation Usually has a stated dividend rate Normally has no voting rights TYPES OF STOCK Common Stock When only one class of stock is outstanding. All stockholders have equal voting rights
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This note was uploaded on 04/03/2008 for the course ACCT 2101 taught by Professor Bhan during the Fall '07 term at University of Georgia Athens.

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Chapter11 - CHAPTER 11 Reporting and Analyzing Equity...

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