Chap12Grand finale 财务报表分析课件
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12-1
Grand finale
12-2
Shareholders’ Equity
1. Understand the different priority claims of common and preferred shareholders and the disclosure of those claims in the shareholders’ section of the balance sheet.
Cash Common stock ($10 par) Additional P.I.C.
100,000 10,000 90,000
12-11
Capital Contributions
-- Issue for Non-Cash Assets
A firm may find it desirable to trade stock for an asset other than cash.
Firms sometimes give stock at reduced prices or free in exchange for goods or services or as compensation.
Top management is often compensated in stock or stock options so that they will have strong incentives to make decisions which will increase the price of shares.
12-16
Stock Warrants.
Firms issue stock warrants to the investing public for cash.
Common shareholders are the residual interest owners; that is, they own everything that is left after all other obligations have been fulfilled.
Balance sheet disclosure includes: 1. Capital contributions 2. Earnings and dividends 3. Accumulated other comprehensive income 4. Treasury share transactions
When the employee does buy shares of stock using the option (to get the lower price), this is called exercising the option.
12-14 Employee Stock Option Plans (cont.)
GAAP ignore any value inherent in the stock right on the date of the grant and make no entry when granted. Of course, the exercise of a stock right is recorded like the sale of shares.
12-15
Stock Rights.
Like stock options, stock rights give the holder the right to acquire shares at a specified price. Stock Options are generally granted to employees and cannot be transfer until vested. Stock Rights are generally granted to current shareholders who can trade them in secondary public markets.
On the grant date, the firm transfers options to an employee, for a reduced price or free.
The employee typically cannot sell the stock immediately but must wait until the vesting date.
In this case, the question is what is the value of the transactions?
We look first to a reliable market based value of the asset and record that stock and the asset at this price.
12-10 Capital Contributions -- Issue for Cash
A firm needing financing may issue new shares of stock. In return for the shares, the firm gets cash.
This is not disadvantageous to previous owners of shares because even though ownership goes up, the total assets go up also.
12-9
Issuing Capital Stock
a. Issue for Cash. b. Issue for non-cash Assets. c. Issue under Option Arrangements. d. Employee Stock Option Plans. e. Stock Rights. f. Stock Warrants. g. Convertible Bonds or Preferred Stock.
for historical and legal reasons, the increase in equity is separated into an increase in common stock at par and the remainder, an increase in additional paid-in capital.
If the value of the asset is hard to measure, we may take the market value of the stock instead.tions --
Issue Under Options Arrangements
2. Understand the underlying concepts and apply the accounting procedures for the issuance of capital stock.
3. Understand why the format for reporting income matters and that different kinds of income require different formats.
Financing a corporation: a. Preferred stock. b. Common stock.
12-7
Preferred Shareholders’ Equity
Preferred shareholders generally have a claim on assets that is superior or senior to any claim by common shareholders.
6. Understand the underlying concepts and apply the accounting procedures for the acquisition and reissue of treasury stock.
7. Develop the skills to interpret disclosures about changes in shareholders’ equity account.
12-13
Employee Stock Option Plans
A stock option is a contract that allows the holder to buy a stated number of shares of stock for a fixed price, called the exercise price. If the market price is above the exercise price, then the option have value. Otherwise, the holder will just ignore the option and it has no value.
12-3
Shareholders’ Equity
4. Understand the distinction between earnings and comprehensive income.
5. Understand the underlying concepts and apply the accounting procedures for cash, property, and stock dividends.
Two GAAP methods: Market Value Method. APB Opinion 25 Method.
Firms have argued (under APB 25) that if the exercise price is above the current stock price, then the option has no value and requires no recording.
Firms do not have to issue preferred stock and many firms have not.
12-8
Common Shareholders’ Equity
All corporations have common stock; they need not have preferred stock.
How do you value an option? If the price of the stock fall, it is valueless. If the price goes up, then the amount of increase is the value.
One cannot know the ultimate value until the exercise date.
Their claims are often limited so that preferred shareholders look more like creditors than owners.
Some preferred is convertible into common shares.
12-4
12-5
12-6
Capital Contributions
The Corporate form: 1. Limits the liability of owner, 2. Allows for raising funds by issuing shares, 3. Makes transfer of ownership easy in secondary markets.
Grand finale
12-2
Shareholders’ Equity
1. Understand the different priority claims of common and preferred shareholders and the disclosure of those claims in the shareholders’ section of the balance sheet.
Cash Common stock ($10 par) Additional P.I.C.
100,000 10,000 90,000
12-11
Capital Contributions
-- Issue for Non-Cash Assets
A firm may find it desirable to trade stock for an asset other than cash.
Firms sometimes give stock at reduced prices or free in exchange for goods or services or as compensation.
Top management is often compensated in stock or stock options so that they will have strong incentives to make decisions which will increase the price of shares.
12-16
Stock Warrants.
Firms issue stock warrants to the investing public for cash.
Common shareholders are the residual interest owners; that is, they own everything that is left after all other obligations have been fulfilled.
Balance sheet disclosure includes: 1. Capital contributions 2. Earnings and dividends 3. Accumulated other comprehensive income 4. Treasury share transactions
When the employee does buy shares of stock using the option (to get the lower price), this is called exercising the option.
12-14 Employee Stock Option Plans (cont.)
GAAP ignore any value inherent in the stock right on the date of the grant and make no entry when granted. Of course, the exercise of a stock right is recorded like the sale of shares.
12-15
Stock Rights.
Like stock options, stock rights give the holder the right to acquire shares at a specified price. Stock Options are generally granted to employees and cannot be transfer until vested. Stock Rights are generally granted to current shareholders who can trade them in secondary public markets.
On the grant date, the firm transfers options to an employee, for a reduced price or free.
The employee typically cannot sell the stock immediately but must wait until the vesting date.
In this case, the question is what is the value of the transactions?
We look first to a reliable market based value of the asset and record that stock and the asset at this price.
12-10 Capital Contributions -- Issue for Cash
A firm needing financing may issue new shares of stock. In return for the shares, the firm gets cash.
This is not disadvantageous to previous owners of shares because even though ownership goes up, the total assets go up also.
12-9
Issuing Capital Stock
a. Issue for Cash. b. Issue for non-cash Assets. c. Issue under Option Arrangements. d. Employee Stock Option Plans. e. Stock Rights. f. Stock Warrants. g. Convertible Bonds or Preferred Stock.
for historical and legal reasons, the increase in equity is separated into an increase in common stock at par and the remainder, an increase in additional paid-in capital.
If the value of the asset is hard to measure, we may take the market value of the stock instead.tions --
Issue Under Options Arrangements
2. Understand the underlying concepts and apply the accounting procedures for the issuance of capital stock.
3. Understand why the format for reporting income matters and that different kinds of income require different formats.
Financing a corporation: a. Preferred stock. b. Common stock.
12-7
Preferred Shareholders’ Equity
Preferred shareholders generally have a claim on assets that is superior or senior to any claim by common shareholders.
6. Understand the underlying concepts and apply the accounting procedures for the acquisition and reissue of treasury stock.
7. Develop the skills to interpret disclosures about changes in shareholders’ equity account.
12-13
Employee Stock Option Plans
A stock option is a contract that allows the holder to buy a stated number of shares of stock for a fixed price, called the exercise price. If the market price is above the exercise price, then the option have value. Otherwise, the holder will just ignore the option and it has no value.
12-3
Shareholders’ Equity
4. Understand the distinction between earnings and comprehensive income.
5. Understand the underlying concepts and apply the accounting procedures for cash, property, and stock dividends.
Two GAAP methods: Market Value Method. APB Opinion 25 Method.
Firms have argued (under APB 25) that if the exercise price is above the current stock price, then the option has no value and requires no recording.
Firms do not have to issue preferred stock and many firms have not.
12-8
Common Shareholders’ Equity
All corporations have common stock; they need not have preferred stock.
How do you value an option? If the price of the stock fall, it is valueless. If the price goes up, then the amount of increase is the value.
One cannot know the ultimate value until the exercise date.
Their claims are often limited so that preferred shareholders look more like creditors than owners.
Some preferred is convertible into common shares.
12-4
12-5
12-6
Capital Contributions
The Corporate form: 1. Limits the liability of owner, 2. Allows for raising funds by issuing shares, 3. Makes transfer of ownership easy in secondary markets.