Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

When individual shareholders buy shares of a company's stock, what do they gain?

A guaranteed fixed interest payment from the company

The right to manage the daily operations of the company

A liability to pay the company's debts

An ownership interest in the company and potential to receive dividends from retained earnings

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Verified step by step guidance

Understand the concept of stock ownership: When shareholders buy shares of a company's stock, they are purchasing a portion of ownership in the company. This ownership is represented by the shares they hold.

Clarify the rights of shareholders: Shareholders typically gain certain rights, such as voting rights in major company decisions (e.g., electing the board of directors) and the potential to receive dividends, which are distributions of the company's retained earnings.

Explain dividends: Dividends are payments made by the company to its shareholders, usually from profits or retained earnings. However, dividends are not guaranteed and depend on the company's financial performance and dividend policy.

Highlight the absence of fixed interest payments: Unlike bondholders, shareholders do not receive fixed interest payments. Their returns depend on the company's profitability and stock price performance.

Discuss limited liability: Shareholders are not personally liable for the company's debts. Their risk is limited to the amount they invested in purchasing the shares.