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23 Cards in this Set
- Front
- Back
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Equity |
The value of an owners' interest in an asset or business. The conduit that ties income statement and balance sheet together. Equity is increased by net income and owners' contributions and is decreased by net losses and owner withdrawals (such as dividends). |
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Accounting Entity |
Any combination of people, assets, and activities devoted to a specific economic purpose. |
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General Partner |
The partner who is active in the business, manages it, and who is generally responsible for its liabilities. |
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Limited Partner |
A partner who is only an investor in a partnership, who has no active role in the management of the business and whose liability is limited to the amount of investment. |
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Joint Venture |
A partnership that is formed to complete one project and is dissolved upon the projects completion. |
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Corporation |
A legal entity granted by a State Charter which becomes a legal person with unlimited life. Ownership of a corporation is evidenced by shares of Common Stock and each owner enjoys Limited Liability. |
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Stockholders/Shareholders |
The owners of a corporation in proportion to the percentage of the company they own as evidenced by the number of Stock Certificates they own as a percentage of the total owned by all stockholders |
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Publicly Traded Stock |
Stock that has been sold to the general public and can be freely bought and sold, generally through a broker on one of the trading markets (like the New York Stock Exchange) |
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Privately Held Stock |
Is owned by one or a few individuals and is not available for sale on a trading market. |
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Shares of Stock |
Certificates issued to each stockholder evidencing how many shares of stock they own. |
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A Stock Issue |
The word issue is used when a company authorizes and offers shares of its stock for sale. |
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Limited Liability Company |
A form of a company that treats all owners, known as members, as limited partners with their individual liability being limited to their investment. Each member is responsible for paying tax on their portion of the income earned by the LLC |
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C-Corps and S-Corps |
These are forms of corporate organizations that are formed under sections of the IRS code that governs how they will pay taxes on profits earned by the company. C-Corps pay taxes directly to the IRS while S-Corps, like LLCs, pay no taxes directly but rather through each owner. |
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Dividends |
The amount of a company's earnings that are paid to stockholders annually. Also called owners' draw or partner withdrawal. Generally decided by a Board of Directors. |
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Retained Earnings |
The amount of a company's net earnings or income that has built over the years, the net of the dividends that have been paid out over the years. |
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Stock Option |
The right to buy stock at a fixed price sometime in the future. Often granted to executives and employees as an incentive to work hard to make profit that, in turn, will increase the value of the company and its stock. |
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Dilution |
The reduction in a stockholder's percentage ownership in a company that occurs when a company issues (sells) new stock to individuals other than existing stock holders. |
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Preferred Stock |
Another type of ownership instrument where the amount of the dividend is determined by a legal agreement and paid before any dividends are paid to the owners of common stock. |
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Book Value per Share |
The company's equity as shown on its balance sheet divided by the number of shares of stock issues and outstanding. |
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Market Value of Common Stock |
An individual share is worth what someone is willing to pay for it. Generally this is readily ascertainable if the stock is publicly traded. |
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Market Capitalization |
The value of the total number of shares of stock outstanding multiplied by the market price per share. |
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Liquidation Value |
The net value of a company when it ceases doing business and sells all of its assets and pays all of its liability. |
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Capitalization Rate |
A computation applied to the earnings of a company that will yield, at a desired rate of return (the Cap Rate) the value of the company. Company Value= Earnings or Cash Flow/ Desired Return |
