Chapter 11

• Authorized number of shares - The maximum number of shares that a corporation can issue, as specified in the
charter.
• Common shares - The basic voting shares issued by a corporation, called residual equity because they rank after
preferred shares for dividend and liquidation distributions.
• Convertible preferred shares - Preferred shares that are convertible to a different class of shares, most often to
common shares, at the option of the holder.
• Cumulative dividend preference - The feature of preferred shares that requires specified current dividends not paid
in full to accumulate for every year in which they are not paid. These cumulative preferred dividends must be paid
before any common dividends can be paid.
• Current dividend preference - The feature of preferred shares that grants preferred shareholders priority for
dividends over common shareholders.
• Date of record - The date on which the corporation prepares the list of current shareholders as shown on its
records; dividends can be paid only to the shareholders who own shares on that date.
• Declaration date - The date on which the board of directors officially approves a dividend.
• Dividends in arrears - Dividends on cumulative preferred shares that have not been declared in prior years.
• Issued shares - The number of authorized shares that have been sold to the public.
• Legal capital - The permanent amount of capital defined by law that must remain invested in the business; it serves
as a cushion for creditors.
• No par value shares - Shares that have no par value specified in the corporate charter.
• Outstanding shares - The total number of shares owned by shareholders on any particular date.
• Par value - The nominal value per share specified in the charter; it serves as the basis for legal capital.
• Payment date - The date on which a cash dividend is paid to the shareholders of record.
• Preferred shares - Shares that have specified rights that are different from those of common shares.
• Stock dividend - A distribution of additional shares of a corporation's own equity.
• Stock split - An increase in the total number of authorized shares by a specified ratio; it does not decrease retained
earnings.