Explains and analyzes stock repurchases the m also

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explains and analyzes stock repurchases. The m also discusses a variety of equity transactions under the general heading of equity carve-outs and convertibles. These tra tions include several methods by which companies seek to unlock hidden value for the benefit of their shareholders. Source: Aon Corporation, 2010 Form 10-K; The Wall Street Journal, January 2012. OS: :DO C)c l>c: Zr -m N l> -I - o Z 8-3 Equity Recognition and Owner Financing Analyzing Contributed Capital I I Analyzing Earned Capital Classes of Stock Stock Transactions Stock Compensation Employee Stock Options Cash Dividends Stock Dividends and Splits Comprehensive Income Foreign Currency Effects Noncontroliing Interest Sell-Offs Spin-Offs Split-Offs Convertible Securities A company rinances its assets through operating cash flows or it taps one or both of the follo sources: either it borrows funds or it sells stock to shareholders. On average, companies 0 about half of their external financing from borrowed sources and the other half from share ers. This module describes the issues relating to stockholders' equity, including the acco for stock transactions (sales and repurchases of stock, dividends, stock-based compensation. convertible securities). We also discuss equity carve-outs, a process by which companies unlock substantial shareholder value via spin-offs and split-offs of business units into se companies. Finally, we discuss the accumulated other comprehensive income and noncont interest components of stockholders' equity. When a company issues stock to the public, it records the receipt of cash (or other assets» an increase in stockholders' equity, representing the shareholders' investment in the company, - increase in cash and equity is equal to the market price of the stock on the issue date mul . by the number of shares sold. Like bonds, stockholders' equity is accounted for at historical cost. Consequently, the pany's financial statements do not reflect fluctuations in the market price of the stock subs to its issuance. The company's stock price results from market transactions that involve 0 parties and not the company. However, if the company repurchases and/or resells shares - own stock, the balance sheet will be affected because those transactions involve the company There is an important difference between accounting for stockholders' equity and a ing for transactions involving assets and liabilities: there is never any gain or'loss report. the purchase and sale of a company's own stock or the payment of dividends to its shareho Instead, these "gains and losses" are reflected as increases and decreases in stockholders' and do not affect net income (nor earned capital, see below). The typical balance sheet has two broad categories of stockholders' equity: 1. Contributed capital These accounts report the proceeds received by the issuing co from original stock issuances. It often includes common stock, preferred stock, and tional paid-in capital. Netted against these contributed capital accounts is treasury
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