AFM101 Chapter Notes - Chapter 12: Authorised Capital, Issued Shares, Share Capital

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Donna Psutka

Document Summary

Only type of business that"s a separate entity. To create a corporation, must apply for a charter submitted to gov"t. Upon approval, gov"t issues article of incorporation. Corporations are governed by a board of directors. Shareholder/stockholder: when you invest in a corporation; you receives shares that you can sell on a stock exchange. Board of directors and, indirectly, all employees are accountable to shareholders. Ratio and comparisons: eps is a measure of return on investment that is based on the # of shares outstanding of the dollar amounts reported on the b/s. Eps = profit available to common shareholders/ avrg # outstanding common shares. Cautions: misleading if significant differences in market values of shares being compared. 2 types of shares: common shares and preferred shares. Common shares: are the basic voting shares issued by a corporation; called residual equity because they rank after preferred shares for dividend and liquidation distributions.