Common shares are issued to business owners and other investors as proof of the money they have paid into a company. Of all shareholders, common shareholders have the least claim on a company’s assets. Show
Common shares make up one part of a company’s shareholder equity, which also includes any preferred shares that have been issued as well as any retained earnings. Owners of common and preferred shares are typically compensated with dividends (money paid to them out of the company’s earnings after tax in return for using their capital). Common shareholders are paid dividends after preferred shareholders. In the event that a company needs to sell off its assets, common shareholders are not paid until all creditors have been satisfied and the preferred shareholders have been reimbursed. Because shares are unsecured investments, a company is not required to repay shareholders for their original investment unless it legally declares that it will. More about common sharesBoth common and preferred shares appear under shareholders’ equity on the balance sheet, as shown in the sample below: 1. LO 14.1Which of the following is not a characteristic that sets
preferred stock apart from common stock? 2. LO 14.1Issued stock is defined as stock that ________.
3. LO 14.1Your friend is considering incorporating and asks for advice. Which of the following is not a major concern?
4. LO 14.1Par value of a stock refers to the ________.
5. LO 14.1Which of the following is not one of the five primary responsibilities of the Securities and Exchange Commission (the SEC)?
6. LO 14.1When a C corporation has only one class of stock it is referred to as ________.
7. LO 14.1The number of shares that a corporation’s incorporation documents allows it to sell is referred to as ________.
8. LO 14.2The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________.
9. LO 14.2Stock can be issued for all except which of the following?
10. LO 14.3A company issued 40 shares of $1 par value common stock for $5,000. The journal entry to record the transaction would include which of the following?
11. LO 14.3A company issued 30 shares of $.50 par value common stock for $12,000. The credit to additional paid-in capital would be ________.
12. LO 14.3A corporation issued 100 shares of $100 par value preferred stock for $150 per share. The resulting journal entry would include which of the following?
13. LO 14.3The date the board of directors votes to declare and pay a cash dividend is called the:
14. LO 14.3Which of the following is true of a stock dividend?
15. LO 14.4Stockholders’ equity consists of which of the following?
16. LO 14.4Retained earnings is accurately described by all except which of the following statements?
17. LO 14.4If a company’s board of directors designates a portion of earnings for a particular purpose due to legal or contractual obligations, they are designated as ________.
18. LO 14.4Corrections of errors that occurred on a previous period’s financial statements are called ________.
19. LO 14.4Owner’s equity represents which of the following?
20. LO 14.5Which of the following is a measurement of earnings that represents the profit before interest, taxes, depreciation and amortization are subtracted?
21. LO 14.5Which of the following measures the portion of a corporation’s profit allocated to each outstanding share of common stock?
22. LO 14.5The measurement of earnings concept that consists of a company’s profit from operations after taxed are subtracted is ________.
23. LO 14.5The correct formula for the calculation of earnings per share is ________.
24. LO 14.5Most analysts believe which of the following is true about EPS?
Which of the following statements is correct regarding profit maximization as the primary goal of the form?Which of the following statements is correct regarding profit maximization as the primary goal of the firm? Profit maximization considers the firm's risk level.
Which of the following statements is correct regarding asymmetric information?Which of the following statements is correct regarding asymmetric information? This is a theory where investors have better information than myopic (shortsighted) management. This occurs when one party, say management, has better information than another party, say investors, about relevant information to each party.
Which of the following statements most accurately describes the modern approach to cash management?Which of the following statements most accurately describes the modern approach to cash management? Cash management involves the efficient disbursement of cash. Cash management involves the efficient collection and disbursement of cash.
Which item below is generally not considered a good reason for selling a security Mcq?Which item below is generally not considered a good reason for selling a security? There may be a tax advantage in selling.
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