Accounting #1 Part 2 Chapter 13 – Flashcards
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Which characteristic of a corporation is a disadvantage?
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double taxation
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The two basic sources of stockholders equity are
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paid-in capital and retained earnings
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What is treasury stock?
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a company's own stock that it has issued and repurchased
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A small stock dividend
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has no effect on total equity
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Ownership and management are separated is a ________ of a corporation
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disadvantage
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Entity has continuous life is a ____ of a corporation
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advantage
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Transfer of ownership is easy is a ___ of a corporation
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advantage
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Stockholders liability is limited is a _____of a corporation
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advantage
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Exposure to double taxation is evident is a _____of a corporation
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disadvantage
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Entity can raise more money than a partnership or sole proprietorship is a _____ of a corporation
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advantage
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Government regulation is expensive is a _____ of a corporation
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disadvantage
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What is a sole proprietorship?
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business owned by one person
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What is a partnership?
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business owned by two or more individuals
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What is a corporation?
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an entity formed under the laws of a particular state
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Advantages of Corporations
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-limited liability
-ease of transfer ownership
-unlimited life
-ease of capital generation
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Disadvantages of Corporations
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-double taxation
-separation of ownership and control
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Advantages of Issuing Debt
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-tax deductible
-interest expense reduces the amount of taxes a company must pay
-if stock is issued, dividend payments are not tax deductible
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Disadvantages of Issuing Debt
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-cash is required-don't have cash on hand anymore
-company can be over committed
-high levels can expose company to financial risk
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How to calculate Earnings Per Share
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(Net Income-Preferred)/ Avg. # of shares
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What happens when a 2 for 1 stock split occurs?
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par value is cut in half, shares issued doubles
