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Chapter 12.docx

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Justin Smith

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Chapter 12 Reporting and Interpreting Owners EquityAdvantages of a corporationsimple to become an ownereasy to transfer ownershipprovides limited liability Because a corporation is a separate legal entity it canown assets sue and be suedincur liabilitiesenter into contracts Ownership of a Corporationvoting in person or by proxyproportionate distributionsof profits dividendsproportionate distributions of assets in a liquidation Shareholders owners of voting sharesBoard of Directors elected by shareholders Internal managers External nonmanagers Presidentappointed by directorsVP Production VP Marketing VP Finance VP Controller Authorized Issued and Outstanding Shares authorized shares maximum number of shares that can be sold to the public frequently set to an unlimited amount to provide maximum flexibility to the corporation oissued shares authorized shares that have been sold outstanding shares are issued shares that are owned by shareholders treasury shares issued shares that have been reacquired by the corporation in Canada reacquired shares are usually cancelled ounissued shares authorized shares that never have been sold authorized oissuedoutstandingtreasury ounissuedEarnings Per Share EPS RatioEPSProfit Available to Common ShareholdersAverage Number of Shares Outstanding for the Period If there are preferred dividends amount subtracted from profit earnings per share is probably the single most widely watched financial ratio Shareholders Equity Transactions Two primary sources of shareholders equity oContributed capitalCommon and preferred sharesContributed surplus oRetained earnings Accounting for Share Capital1 Contributed capital which reflects the amount invested by shareholders has two distinct components oa amounts initially received from the sale of shares
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