Question

List the values commonly associated with capital stock and give their definitions.

Answer 1

In capital stock there are values :-

1. Common stock - Common stock are the shares/stocks held by the investors which give them the voting rights. Technically, common stock holders are the owners of the company. It is calculated by multiplying the number of shares outstanding with the par value of the common stock.

2. Additional paid-in capital - It includes the premium amount on the shares issued. Often times, the company issue there shares at premium. Premium is the amount charged by the company in excess of par value. It is calculated by multiplying the premium on the shares by the number of shares issued at premium.

3. Retained earnings - It is the amount of net income left with the company after distribution of dividends. Company can use this amount for expansion of business.

4. Preferred stock- they are the stocks which are issued by the company. They are similar to common stock but they get preference over common stock stockholders at time of distribution of dividend or distribution of assets at the time of liquidation. It is calculated by multiplying the number of shares outstanding by the par value of the preferred stock.