Comprehensive income comprehensive income an all

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Unformatted text preview: es ability to meet fixed obligations The larger the ratio, the better the ability to meet interest payments Wrap- up – – – – Liabilities are obligations to provide cash, goods or services Current liabilities are generally due in one year Examples include bonds, leases, pension obligations, contingencies, and income taxes Financial statement analysis and interpretation may require adjustments due to measurement problems CHAPTER 10: OWNERS’ EQUITY Corporations Separate legal and taxable entity Ownership rests with shareholders Incorporated entity Taxes on profits paid by company Shareholders not liable for debts of company Proprietorships Ownership rests with one individual Not an incorporated entity Taxes on profits paid by individual Individual is liable for debts of business Partnerships Ownership rests with partners Not an incorporated entity Taxes on profits paid by partners individually Partners liable for debts of partnership Jessica Gahtan ACTG2011 Page 15 Final Notes Chapters 8- 12 Fall 2013 Limited Partnerships Same characteristics as partnership Except limited partners are not liable for debts of partnership General partner runs partnership Limited partners invest in partnership Limited Liability Partnerships Often used by professional – Examples, accountants, lawyers Innocent partners shielded from personal liability if not involved Not- for- profit Organizations An entity whose objective is to provide services, not to make a profit Does not have “owners” Does not have shareholders’ equity Characteristics of Equity Represents ownership of corporation Share in profits through dividends – Dividends at the discretion of board of directors Entitled to distribution on winding up – After debt holders are satisfied Common Shares Represent the residual ownership of the company Common shareholders elect board of directors No guaranteed dividend Entitled to what is left over after obligations to debt holders and preferred shareholders Preferred Shares Have rights that must be satisfied before common shareholders Usually have specified dividend rate Must be paid before dividend can be paid to common Preferred treatment on distribution of assets on winding up No participation in “upside” of company Features of Preferred Shares Certain features may be offered – Cumulative as to dividends – Convertible into common shares – Redeemable at discretion of company – Retractable at discretion of shareholder – Participating in profits Jessica Gahtan ACTG2011 Page 16 Final Notes Chapters 8- 12 Fall 2013 Features are negotiated prior to issue Share Repurchases Corporation buys back its own shares from current shareholders Method of using excess cash...
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