Chapter 10 Outline

Chapter 10 Outline - CHAPTER 10 - OBJECTIVES Explain the...

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3/11/11 CHAPTER 10 -- OBJECTIVES Explain the business purpose of issuing stock Explain and record the accounting for different classes of stock Explain the business purpose of distributing dividends Explain and record the different types of dividends Explain the business purpose of stock repurchases Compute and discuss ratios used to evaluate
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3/11/11 Management Decision Cycle FINANCING DECISIONS INVESTING DECISIONS OPERATING DECISIONS FUNDING OPERATING PROFIT INVESTMENTS
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3/11/11 Financing Decisions Investment by owners Loans from creditors Business capital (Funding)
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3/11/11 Forms of Business Ownership Sole proprietorship Owner’s capital Draws Partnership Partners’ capital Draws Corporation Stock
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3/11/11 Characteristics of Corporation Owned by one or more individuals Ownership signified by stock certificates Owners called stockholders’ Control declines with additional owners Organized under the laws of a particular state Legally separate from owners Stockholders’ liability limited to amount of investment
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3/11/11 Creation of Corporation Articles of Incorporation filed with state Describe how stock may be issued Describe classes and shares of stock Common stock Preferred stock Authorized shares Define legal capital for each share of stock Par value State value No par Other important terms Issued shares 66
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3/11/11 Raising Equity Capital Incorporation increases company’s ability to raise cash (or capital) Ease of transfer of ownership Limited liability of owners Ownership divided into Shares New corporations usually rely on: Venture capital Reinvesting profits back into company 77
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3/11/11 Elements of Stockholders’ Equity represents owner’s claims against corporate assets after all liabilities are deducted SHE elements classified according to source: Capital stock Preferred stock Common stock Associated paid-in capital in excess of par Retained earnings (or deficit) 88
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3/11/11 Authorized/Issued/Outstanding Corporate charter Describes how stock may be issued Number of classes and shares of stock Authorized shares : maximum number of shares a business may issue in each class Issued shares : number of shares actually sold to stockholders Outstanding shares : number of shares actually in the 99
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3/11/11 Issued and Outstanding- Shares are authorized within the articles of incorporation of the company. Authorization does not affect the accounting records because no money has been received for the stock at this point. Shares are issued when the company sells them to an investor and receives cash or some other benefit in return. Once issued, shares are
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This note was uploaded on 03/10/2011 for the course ACC 210 taught by Professor Staff during the Spring '07 term at N.C. State.

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Chapter 10 Outline - CHAPTER 10 - OBJECTIVES Explain the...

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