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Chapter 14 - Contributed capital. Chapter 14 focuses on long-term equity financing, including the types of equity securities and transactions affecting the stockholders' equity section of the balance sheet, such as stock issues, dividends, and treasury stock purchases. | Contributed Capital Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 14 Learning Objectives Identify and explain the management issues related to contributed capital. Identify the components of stockholders’ equity. Account for cash dividends. Identify the characteristics of preferred stock, including the effect on distribution of dividends. Learning Objectives (cont’d) Account for the issuance of stock for cash and other assets. Account for treasury stock. Management Issues Related to Contributed Capital Objective 1 Identify and explain the management issues related to contributed capital A Corporation is defined as a body of persons granted a charter recognizing them as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members In other words, a corporation is a legal entity separate and distinct from its owners Management of contributed capital is a critical component in financing the corporation . | Contributed Capital Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 14 Learning Objectives Identify and explain the management issues related to contributed capital. Identify the components of stockholders’ equity. Account for cash dividends. Identify the characteristics of preferred stock, including the effect on distribution of dividends. Learning Objectives (cont’d) Account for the issuance of stock for cash and other assets. Account for treasury stock. Management Issues Related to Contributed Capital Objective 1 Identify and explain the management issues related to contributed capital A Corporation is defined as a body of persons granted a charter recognizing them as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members In other words, a corporation is a legal entity separate and distinct from its owners Management of contributed capital is a critical component in financing the corporation Management Issues Related to Contributed Capital Managing under the corporate form of business Using equity financing Determining dividend policies Evaluating performance using return on equity Using stock options as compensation Managing under the Corporate Form of Business Corporations dominate the economy in total dollars of assets and output of goods and services Even though sole proprietorships and partnerships outnumber corporations in the U.S. Contributed capital New funds are raised by issuing bonds, new common stock, and preferred stock Sources of Capital Raised by Corporations in the United States Advantages of the Corporate Form of Business Separate legal entity Limited liability Ease of capital generation Ease of transfer of ownership Lack of mutual agency Continuous existence Centralized authority and responsibility Professional management Disadvantages of the Corporate Form of Business Government regulation Taxation Limited liability Separation of ownership and control .
