ACTG 2010 Chapter 1: ACTG2010 - Chapter 10
57 views84 pages
Document Summary
Common shares represent the residual ownership of the entity, and the owners have a claim to the earnings and assets of the entity after the claims of the creditors and preferred shareholders have been satisfied. Preferred shares rank in claim ahead of common shares. Preferred shares have rights that must be satisfied before common shareholders" rights. These preferred rights pertain to the payment of dividends and/or to the distribution of assets in the event of liquidation. Dividends on preferred shares must be paid before dividends can be paid to common shareholders. If the corporation is liquidated, preferred shareholders" claims to assets must be satisfied before the common shareholders" claims. Therefore it"s riskier for an investor to own common shares than preferred shares because preferred shares have priority to dividends and residual claim of a liquidated company. Leverage is the use of debt to attempt to increase the return earned on the equity investment of the owners.
Get access
Grade+
$40 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers
Related Documents
Related Questions
Match the items below by selecting the appropriate number in thespace provided.
Net income retained in the corporation. | |
The amount that must be retained in the business for theprotection of creditors. | |
Preferred stockholders have a right to receive current andunpaid prior-year dividends before common stockholders receive anydividends. | |
Creditors only have corporate assets to satisfy theirclaims. | |
Responsible to stockholders for corporate activity. | |
The amount assigned to each share of stock in the corporatecharter. | |
Unit of ownership in a corporation. | |
Enables stockholders to maintain their same percentageownership when new shares are issued. | |
Corporation's own stock that has been reacquired by thecorporation but not retired. | |
Total amount paid-in on capital stock. |
1. | Limited liability |
2. | Capital stock |
3. | Board of directors |
4. | Paid-in capital |
5. | Retained earnings |
6. | Preemptive right |
7. | Par value |
8. | Legal capital |
9. | Treasury stock |
10. | Cumulative feature |