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ACIS 2115 Chapter 11 Lecture Spring 2009

ACIS 2115 Chapter 11 Lecture Spring 2009 - Chapter 11...

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Chapter 11 Reporting and Interpreting Stockholders’ Equity
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11-2 Learning Objective 1 Explain the role of stock in financing a corporation.
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11-3 Advantages of Corporations Can raise large amounts of money Relatively simple to become an owner Easy to transfer ownership Provides limited liability
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11-4 Because a corporation is a separate legal entity , it can . . . Corporate Ownership Own Assets Incur Liabilities Sue and be sued Enter into Contracts
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11-5 Stockholder Benefits/Rights Voting rights Right to receive dividends declared Residual claims Upon liquidation, right to assets remaining after creditors paid Preemptive rights First chance to buy newly issued shares of stock
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11-6 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 ) 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 e r s o n n e l ) 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 I n t e r n a l ( m a n a g e r s ) a n d E x t e r n a l ( n o n - m a n a g e r s ) S t o c k h o l d e r s ( O w n e r s o f v o t i n g s h a r e s ) Elected by shareholders Appointed by directors Corporate Ownership
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11-7 Equity Versus Debt Financing Advantages of equity Equity does not have to be repaid. Dividends are optional. Advantages of debt Interest on debt is tax deductible. Debt does not change stockholder control. Advantages of equity and debt financing.
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11-8 Learning Objective 2 Explain and analyze common stock transactions.
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11-9 Two primary sources of stockholders’ equity Contributed capital Retained earnings Common Stock Additional paid-in capital Common Stock Transactions
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11-10 Authorization, Issuance, and Repurchase The maximum number of shares of capital stock that can be sold to the public. Authorized Shares Authorized shares are specified in the corporate charter.
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11-11 Authorized Shares Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold. Authorization, Issuance, and Repurchase
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11-12 Authorized Shares Unissued Shares Treasury Shares Outstanding Shares Issued Shares Treasury shares are issued shares that have been reacquired by the corporation. Outstanding shares are issued shares that are owned by stockholders. Authorization, Issuance, and Repurchase
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11-13 Excerpt from Papa John’s Balance Sheet showing Stockholders’ Equity at Dec. 30, 2007. (Dollar amounts in thousands). Stockholders' Equity Contributed Capital Common stock. Par Value $0.01 per share Authorized: 50,000,000 Shares Issued: 34,866,000 Shares 349 $ Additional paid-in capital 208,598 Preferred Stock. Par Value $0.01 per share Authorized: 5,000,000; none outstanding - 208,947 Accumulated Other Comprehensive Income 156 Retained earnings 96,963 306,066 Treasury Stock, at cost: 6,089,000 Common Shares (179,163) Total stockholders' equity 126,903 $ Common Stock Transactions
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11-14 All corporations are required to issue common stock at incorporation.
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