Chapter 10 Review Questions-Trone PDF

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Chapter 10 Review Questions   

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Shareholders equity is another common term for stockholder’s equity The amount of money paid into a company by its owners is referred to as invested capital A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. This is called articles of incorporation or corporate charter. The rights of common stockholders typically include the rights to dividends when declared, right to vote for corporate directors, and right to distribution of assets in liquidation The advantages to the corporate form of business include ease of raising capital and transferability of ownership The most important advantage to the corporate form of business is limited liability regulation is a disadvantage to the corporate form of business Paid in capital is the amount of money paid into a company by its owners A Corporation is owned by its shareholders A corporate charter named the board of directors, describes the business activities, and specifies the shares of stock to be issued The right to vote on certain matters is included in the rights of common stockholders The total number of shares that a company may sell it was referred to as authorized shares Preferred stock has preference as to dividends, is useful for railing capital without reducing common stockholders’ control, and generally does not have voting rights Any Corporation the stockholder’s potential loss is limited to the amount of the investment Preferred stockholders have the right to receive dividends only in the years a board of directors declares dividends Special contractually granted features can make preferred stock redeemable, cumulative, and convertible Shares of stock previously sold by the Corporation that I repurchase are called Treasury stock The number of shares authorized is set forth in the company's articles of incorporation Earned capital matches with retained earnings while invested capital matches with common stock Preferred stock is advantageous in that it has priority over common stock at liquidation and has priority over common stock when dividends are declared A corporation's accumulated undistributed net income or loss is referred as retained earnings Preferred stock is preferred over common stock by providing preferred stockholders with the rights of preference in distribution of assets during dissolution of Corporation and 1st right to specified amount of dividends A distribution of assets to shareholders is referred to as a dividend

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Similar to a stock split, a stock dividend also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders The term Treasury stock refers to stock that is repurchased by the issuing Corporation A frequent reason for a stock split is to cause the market price preferred to decline Earned capital increases retained earnings Stock splits cause the par value per share to change stock splits and stock dividends cause total stockholders’ equity to remain the same stock dividends require a Journal entry Preferred stock is listed first in the stockholder’s equity section of the balance sheet The purpose of the statement of shareholders equity is to report the changes and the sources of the changes in shareholder equity accounts Additional shares issued to existing owners without an exchange of cash may be in the form of stock splits or stock dividends Positive income represents the key to a company's long run survival A 2 for 1 stock split increases the marketability of the stock because the market price per share decreases Return on equity measures ability of company management to generate earnings from the resources owners provide Evaluation of a company's profitability requires consideration of the amount of a company's earnings in relation to the size of the investment...