Shareholders Equity
12 important questions on Shareholders Equity
What are the four advantages of a corporation?
- Can raise more capital
- continious life
- ease of transferring ownership
- limited liability of shareholders
How to record issuing shares above par value?
Debit cash
Credit Ordinary shares
Credit Paid-in capital excess of par
The company purchases their own shares for 3 reasons, namely:
- It offers the employee share option compensation or a employee share ownership plan.
- The management wants to avoid a takeover.
- The management wants to increase its reported earnings per share.
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How to record the resale of treasury shares when they ask a higher price for them than they paid for it?
Debit Cash
Credit treasury shares
Credit share capital
There are 3 forms of dividend, namely:
- Cash dividend
- Stock dividend
- Non-cast assets
There are restrictions for companies to pay dividend, these are ...
1. Having enough retained earnings to declare the dividend
2. Having enough cash to pay the dividend.
What is the declaration date?
The date on which the board of director announces the dividend.
How to record a declaration of dividend?
Debit retained earnings
Credit dividends payable
Cumulative preference shares are ...
preference shares whose owners must receive all dividend n arrears before the corporation can pay dividends to the ordinary shareholders.
Why would a corporation choose to distribute share dividends?
1. To continue dividends but conserve cash
2. To reduce the market price of its share
What is a stock split?
an increase in the number of shares authorized, issued, and outstanding, coupled with a proportionate reduction in share's par-value.
How to calculate the return on equity (ROE)?
(Net income + preference dividends) / Average ordinary shareholders' equity
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
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- 100% sure, 100% understanding
