ACC 100 Chapter Notes - Chapter 11: Treasury Stock, Retained Earnings, Issued Shares
Document Summary
Two major components of the shareholders" equity: contributed capital + Authorized shares: the maximum number of shares a corporation may issue as indicated in the corporate charter. Issued shares: the number of shares sold or distributed to shareholders. Par value: an arbitrary amount stated on the face of the share certificate representing the legal capital of the corporation. Additional paid-in capital: an amount received that is greater than the par value of the shares when shares were issued. Cumulative feature: the right to dividends in arrears before the current- year dividend is distributed. Convertible feature: allows preferred shares to be exchanged for common shares. Callable feature: allows the firm to eliminate a class of share by paying the shareholders a specific amount. Dividend payout ratio: the annual dividend amount divided by the annual net income. Cash dividends: when issued, retained earnings goes down and liabilities go up, when paid, assets (cash) goes down while liabilities go down (cash dividend payable)