Chapter 11
Chapter 11: Acct for Stockholder’s Equity
Handouts, Demos, E11-17A / GQ#4 / AQ#6 / No Canvas
1) Three Main Forms of Business Organizations (pg 594):
a) Sole-Proprietorship (Fed Tax Form 1040 & Sch “C”)
b) Partnership (Federal Tax Form 1065)
c) Corporation (Federal Tax Form 1120 & 1120S)
o Articles of Incorporation (i.e. separate legal entity)
o Publicly-Held vs. Privately-Held Corporations
o Class Handout #1 (Entity Attributes)
2) Capital Structure of “Stockholder’s Equity” component:
a) Equity presentation for above entities:
(Sole Prop-pg 597 / Partnership-pg 598 / Corp-pg 603)
3) Our Focus: Corporation Components (pg 599-604):
a) Stock: Legal capital is generally called “Par” Value.
- Note: “Par” Value is not equal to “Market” Value!
b) Terms: Authorized, Issued & Outstanding shares.
c) Common vs. Preferred Stock (Class Handout #2)
d) Treasury Stock: Why would a firm buy back its stock?
4) Rewards to Shareholders (pg 605-607): (Class Handout #3)
a) Acct for Cash Dividends:
o “Declaration”, “Record” and “Payment” dates.
b) Acct for Stock Dividends: What is the purpose here?
c) Stock “Splits” & effect on the stock’s market price.
5) New Ratio involving Stockholder’s Equity: (E11-17A)
a) Price-Earnings (i.e. “P/E”) Ratio - Pg 611:
o One measurement of expected earnings-growth.
o What is an investor paying for when they purchase shares of stock in a company? Answer: Future earnings and/or potential growth of the company!
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