authorized stock

(noun)

shares created by the company

Related Terms

Examples of authorized stock in the following topics:

  • Issuing Stock

    • The amount of issued stock is based on a company's authorized shares, or the maximum number of shares authorized for issue to shareholders.
    • The amount of issued stock is dependent on the authorized capital of a company, or the maximum number of shares authorized by a company's corporate documents to issue to shareholders.
    • A portion of authorized capital tends to remain unissued, but the number can be changed by shareholder approval.
    • Issued shares are the sum of outstanding shares and treasury stock, or stock reacquired by the company.
    • Owning common stock tends to be riskier than owning preferred stock; yet over time, common shares on average perform better than preferred shares or bonds.

  • Treasury Stock

    • Treasury stock is a company's issued and reacquired capital stock; the stock has not been retired and is legally available for reissuance.
    • Treasury stock is the corporation's own capital stock it has issued and then reacquired.
    • When a corporation has additional authorized shares of stock that are to be issued after the date of original issue, in most states the preemptive right requires offering these additional shares first to existing stockholders on a pro rata basis.
    • When the stock is resold, treasury stock is credited for the par value of the stock sold.
    • Companies that issue common stock and reacquire it in the future, reclassify it as treasury stock.

  • Accounting Considerations

    • Accounting for dividends depends on their payment method (cash or stock).
    • Accounting for dividends depends on their payment method (cash or stock).
    • Stock dividends are parsed out as additional stocks to shareholders on record.
    • If a firm authorizes a 15% stock dividend on Dec 1st, distributable on Feb 29, and to stockholders of record on Feb 1, the stock currently has a market value of $15 and a par value of $4.
    • On the day of issuance, the stock dividends distributable account is debited and stock is credited $90,000.

  • Accounting for Preferred Stock

    • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
    • When a corporation issues both preferred and common stock, the preferred stock may be:
    • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
    • Convertible preferred stock is uncommon, most preferred stock is nonconvertible.
    • The par value, authorized shares, issued shares, and outstanding shares is disclosed for each type of stock.

  • NASDAQ

    • The NASDAQ Stock Market, also known simply as the NASDAQ, is an American stock exchange.
    • It is owned and operated by the NASDAQ OMX Group and regulated by the Financial Industry Regulatory Authority (FINRA), the successor to the NASD.
    • When the NASDAQ stock exchange began trading on February 8, 1971, it was the world's first electronic stock market.
    • A stock index or stock market index is a method of measuring the value of a section of the stock market.
    • It is calculated from weighting common stocks and similar securities listed on the NASDAQ stock market.

  • Securities Market Institutions

    • The U.S. government requires investment bankers to disclose information to investors, helping to prevent risk and fraud.Unfortunately, investment bankers have access to inside information about corporate mergers.When a corporation takes over another corporation, the merger causes the company's stock price to soar.Thus, investment bankers can secretly buy stock or share information with friends and family who buys that particular stock.Insiders can earn a substantial amount of profit, and it is illegal in the United States.The Securities ExchangeCommission has the authority to investigate and to prosecute these cases.
    • Many countries removed the barriers to their financial markets, allowing international companies to sell or buy stock in their countries.For example, a German investor can buy U.S. corporate stock like GE and IBM on the Frankfurt Stock Exchange, while an American investor can buy Japanese stock for Honda Motors and Sony on the New York Stock Exchange.Consequently, the financial markets are truly global, and link savers and investors together across the world.
    • A stock market, occasionally, experiences a rapid drop in stock prices, which precipitate a stock market crash.A stock market crash means a dramatic drop in stock prices during a short time period.Unfortunately, a stock market crash bankrupts investment companies, insurance companies, pension funds, and commercial banks.Although commercial banks are not directly involved with the stock market, they may have granted loans to investors who cannot repay.Finally, a stock market crash in one market can trigger another stock market crash, even a stock market located in a foreign country.
    • Stock market crash became the prelude to the Great Depression.In 1929, the stock market crashed on October 24, October 28, and October 29.Afterwards, the unemployment rate peaked at 26% in the United States.Moreover, the New York Stock Exchange crashed on October 19, 1987.The Dow Jones fell by 508 points (or 27.8%) in one day, the largest loss in U.S. history.However, the United States did not enter a recession because the Federal Reserve came to the rescue, providing emergency loans to the financial institutions.Then the United States experienced a stock market crash in March 2000, which triggered the 2001 Recession.Many people call this the dot-com crash because stock value for many internet companies became worthless overnight.Finally, the U.S. experienced the 2007 Great Recession, which became the most severe recession since the Great Depression.Your author calls this the 2008 Financial Crisis, when pandemonium struck the financial world.
    • When investors see the Dow Jones soaring, they invest more money into the stock market.As investors dump more money into the stock market, the stock prices continue rising.If investors see the stock market prices began falling, then they pull their money out of the stock market, and stock prices continue falling.If stockholders become afraid, they cash in all their stocks at once, causing thestock prices to plummet.Thus, the market moves in cycles, being driven by public's psychology and their expectations about future stock prices.

  • Accounting for Sale of Stock

    • How the stock sale is accounted for depends on the type of stock sold.
    • How the stock sale is accounted for depends on the type of stock sold.
    • Most stock sales involve common stock or preferred stock.
    • Most stock sales involve common stock or preferred stock.
    • Summarize how to account for the sale of common stock, preferred stock and treasury stock

  • Types of Stock Market Transactions

    • Types of stock market transactions include IPO, secondary market offerings, secondary markets, private placement, and stock repurchase.
    • An initial public offering (IPO), or stock market launch, is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time.
    • Financial Industry Regulatory Authority (FINRA), is a registered offering of a large block of a security that has been previously issued to the public.
    • Stock repurchase (or share buyback) is the reacquisition by a company of its own stock.
    • The company either retires the repurchased shares or keeps them as treasury stock, available for re-issuance.

  • Corporations

    • Corporations start as private companies that transform into a corporation.They have an Initial Public Offer (IPO), the day the corporation begins selling stock to the public.Usually, the corporation's founder holds large shares in the company's stock and becomes a millionaire or billionaire over night from the market value of his or her stock holdings.
    • Stockholders can easily transfer corporate ownership.Stocks are certificates that represent ownership in a corporation, and stockholders can freely buy or sell stock to other investors through the stock market.
    • Corporations could issue two different classes of stock: common stock and preferred stock.Common stock allows stockholders to vote at stockholder meetings, while preferred stock does not have any voting rights.For stockholders to give up their voting right, they will receive their dividends before the common stockholders.Consequently, a corporation could issue preferred stock to expand operations and not share control of the corporation with the new preferred stockholders.Moreover, corporations can pay different dividends, paying a higher dividend to the common shareholders.
    • Redeemable Stock – a corporation has the right to repurchase the preferred stock in the future.
    • Convertible Stock – a stockholder can convert preferred stock into common stock on a specific date in the future.

  • Dividend Irrelevance Theory

    • It does not matter if the firm's capital is raised by issuing stock or selling debt, nor does it matter what the firm's dividend policy is.
    • Essentially, firms that pay more dividends offer less stock price appreciation that would benefit stock owners who could choose to profit from selling the stock.
    • If dividends are too small, a stockholder can simply choose to sell some portion of his stock.
    • Merton Miller, one of the co-authors of the capital irrelevance theory which implied dividend irrelevance.