C1 Chapter 11

C1 Chapter 11 - 11-1Chapter 11Shareholders’...

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Unformatted text preview: 11-1Chapter 11Shareholders’ EquityCertificate of ShareFinancial Accounting 1st Canadian ed. by PNCS-B11-2DisadvantagesAdvantagesEquity Financing: Issue Shares●Dividend flexibility●Ready markets●Often provides higher ROI than debt financing●Borrowing may not be feasible11-3Equity Financing: Issue Shares●Less control●Dividends not tax deductible●Hurts some financial ratiosDisadvantagesAdvantages11-4Expanded Accounting EquationAssets = Liabilities + Owners’ EquityAssets = Liabilities + Shareholders’ EquityContributed CapitalRetainedEarnings11-5Relationships among Financial Statements – CN Railway company .Statement of Change in Shareholders’ Equity for 2004Beginning balance, retained income$ 2,822Add: Net income1,297Share repurchase(221)Deduct: Cash dividends(222)Ending balance, reinvested income$ 3,676Balance Sheet as of December 31, 2004Total Assets$xxxTotal LiabilitiesxxxCapital StockxxxReinvested Earnings3,676Total Liabilities & Shareholders' Equity$ xxxIncome Statement for 2004Revenues$ xxxLess: expensesxxxNet income$ 1,29711-6Shareholders' equity:Common sharers3,687 3,530Contributed surplus164 166Currency translations(46) (80)Retained earnings3,6763,822Total shareholders' equity7,3476,480CNPartial Balance Sheet(in millions)2004200311-7Contributed Capital●Common Stock»basic shares of corporation»has voting rights»represents ownership interest●Preferred Stock»optional»tailored to meet specific needs»provides dividend returns with less riskCertificate of Share11-8Outstanding -notrepurchased or retiredIssued -sold & distributedNumber of Shares Authorized1,MaximumAllowable11-9Par Value»“Legal capital”»Arbitrary amount stated on share certificate»also called “stated value”»Canadian companies issue non-par shares onlyCertificate of Share$1.00 Par Value11-10Retained Earnings●Net income retained in business (not paid out as dividends) since inception●Reinvested in a variety of assets (not necessarily liquid)11-11Preferred Shares●Can tailor to specific needs of firm●Stated dividend●Often carries dividend preference over common shares$7, Preferred Share11-12Preferred Shares Features●Callable●Convertible123456789101112131415161718192021222324252628293031272003123456789101112131415161718192021222324252628293031272004123456789101112131415161718192021222324252628293031272005PreferredCommon●Cumulative●Participating11-13...
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This note was uploaded on 10/19/2011 for the course ACCT 2242 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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C1 Chapter 11 - 11-1Chapter 11Shareholders’...

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