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Accounting Issues - Assignment Example
Finance & Accounting
Pages 3 (753 words)
The quote stated by Mr. Puckett, “We’ve got a lot of retained earnings, but that’s not the same as cash, you know”, is absolutely truth. Cash and retained earnings are not the same thing…
Retained earnings are the accumulated wealth of earnings not paid as dividends that the company obtained over the years. The cash balance of the company as of December 31, 2012 was $2,800,000. In terms of retained earnings the company had a balance of $31,400,000. Based on the asset distribution of the company it seems as if the company invested its retained earnings in the past in property, plant, and equipment. Common stocks, preferred stocks, and bonds payable are three distinct financial instruments that corporations can utilize to raise money. A common stock can be defined as an equity security that has last claim on residual assets and earnings of a corporation (Tewales, Bradley, Tewales). Common stocks are traded in the open market and its price fluctuates daily. A common stock gives its owner a participation stake in the ownership of a company. Common stocks have voting rights. At the end of the fiscal year shareholders are eligible to receive dividends if the board of directors declares them. A preferred stock is a special type of stock that has a claim on a corporation’s earnings, dividends, and assets ahead of common stock, but behind debt (Tewales, et al.). Corporations are mandated to pay dividends to preferred stock holders. If dividends are not paid they become cumulative and must be paid in the next accounting period. ...
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