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ACC 100 (209)
Chapter 11

Chapter 11 - ACC100 - Textbook Notes - Shareholders Equity .docx

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Ryerson University
ACC 100
Cheryl Dyson

ACC100 Chapter 11 Textbook Notes Nov 11, 13  Advantage of Financing with Shares: o Flexibility: dividends can be reduced or increased depending of profitable years (advantage for issuing company) o Exchanges facilitate trading: large companies have ready markets for shares (advantage for issuing company and investors) o Return on Investment: Shares generally provide a higher return in dividends and in growth than interest on debt (advantage for investors)  Disadvantages of Financing with Shares: o Control: Less control of the company (disadvantage for issuing company) o Tax consequences: Interest on debt is tax deductible while dividends on shares is not o Impact on ratios: issuing shares decreases several important financial ratios, including earnings per share (disadvantage for issuing company)  Two major components of the Shareholders’ Equity: Contributed Capital + Retained Earnings  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  Outstanding Shares: The number of shares issued less the number of shares held as treasury stock if any. o Outstanding states that shares are in the hands of shareholders o Corporations often repurchase their shares as treasury stock, which reduces the amount of
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