GSU ACCT 2102 - Raising Capital through equity Financing (5 pages)

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ACCT 2102 Lecture 4 Lecture 5 Review 9 11 I Debt Financing II Risk of Debt Financing III Reward of Debt Financing IV Equity Financing V Return of Equity VI Financial Ratio VII Types of Business Combinations VIII Determining the Allocation of Profits Losses in Partnership Lecture 6 9 17 I Raising Capital through equity Financing A Issuing stock B Reinvesting retained earnings II Stock A Cumulative and noncumulative preference calculation B Different number of Shares C Issuing stock III Treasury Stock A Definition B Effect on accounting equation IV Values Associated with Stock V Dividends A Types B Dates associated with dividends C Cash dividends D Stock Dividend v Stock Split Current Lecture Raising Capital through Equity o To raise money from its owners a company can do two things Issue stock Reinvest retained earnings These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Types of Stock Issued o Common stock Uses residual interest Making investors owners of the company and giving them voting rights Preemptive rights o Preferred stock Gives investors some rights of ownership Preference over common stock but not debt in dividends and or liquidation They receive their dividends quicker than common stock holders o Most Common Preferences of Stock Cumulative Unpaid dividends are accumulated Participating Right to receive more than stated rate Callable Right to repurchase at a stipulated price by corporation Convertible Gives the shareholder the right to convert to other forms of capital Redeemable Gives the shareholder the right to turn in stock for cash Noncumulative Dividends o There is no accumulation of unpaid dividends over years o Meaning In order for common shareholders to be paid dividends preferred shareholders must be paid their dividends for the current period Issued 228 000 30 000 Common stock 1 par Preferred stock 8 10 par Number of shares Outstanding 200 000