ACTG 2011 Lecture Notes - Lecture 3: Share Capital, Reverse Stock Split, Retained Earnings
15 Sep 2016
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Corporation separate legal entity, taxable owners are its shareholders limited liability (shareholders are not liable for obligations or losses beyond what they invested) Contrast with partnerships (pg 602) and nfpos (605) Less risky, doesn"t commit the corporation to any payments at any time. Dividends are not deductible for tax expenses, as they are not expensed. Authorized capital stock the maximum number of each type of share that can be issued. Issued shares - # of shares distributed by corporation. Outstanding shares - # of shares currently in hands of stakeholders: the two are not always equal as shared are sometimes repurchased by a corporation and held for resale. Common shareholders are entitled to whatever earnings and assets are left after obligations to debt holders and preferred shareholders have been satisfied. No matter how much the venture makes, creditors receive their pay: venture may lose or earn money, if they earn, shareholders are entitled to the full amount.
