3.1 Differentiate types of stocks issued by corporations.
The team concluded that the different types of stocks issued by a corporation are common stock, preferred stock, and treasury stock. Everyone is aware that common stock gives stockholders the right to vote on actions dealing with corporate earnings through the acquisition of dividends, and keeping the same percentage of shares when new stocks are issued. Preferred stocks are additional class of stocks issued by corporations to appeal to more investors. Treasury stock is stock that a company has issued, and then reacquires. Though everyone is aware of what types of stocks are issued by corporations, there are still some areas where team members expressed still being confused.
One of those areas of concern deals with authorized stock and why companies do not put a par value on a stock to determine its value. Another area of confusion deals with treasury stock and grasping the concept. In relation to each member’s organization and the issuance of stock, everyone expect for one team member works for a non-profit organization or a company that does not issue stock. The one member, however, works for an airline and expressed that the company, United Airlines, has common and treasury stocks (United Continental Holdings, Inc., 2010).
3.2 Calculate stocks, dividends, and stock splits.
For objective 3.2, some team members seem to understand better than others, what is involved in the calculation of stocks, dividends, and stock splits. Stock is calculated by subtracting the dividends of a certain stock from the company’s net income, then dividing that number by the number of outstanding shares. To calculate dividends multiply the number of shares by the annual dividend to find out how much the dividend payment will be, find the yield on investment a dividend payment represents by multiplying the dividend by the amount paid per share of stock, Calculate the dividend-payment ratio, and then figure out the dividend cover (earnings per share divided by the dividend) (Adkins, 2009-2013).
As expressed early, more than not, members had a problem grasping the premise to calculating stock. In relation to each member’s employer organization, three of five have not had dealings with stock or they are not aware of the exact actions their company takes when it comes to calculating stocks, dividends, or stock splits. One member did however mention investing in stock indexes not including the organization she works for. Another member shared how he was able to actually view an investment split which helped him better understand.
3.3 Record treasury stock transactions.
This objective seems to be the most confusing for the team. It is understood by all members that treasury stock is stock that has been issued by an organization, and then reacquired. However, there is still confusion about understanding the concept behind it. One member did express that her organization buys treasury stock to help cover them in situations such as the fluctuation of the economy. They would also try to sell the stock for equal value so more people would want to invest.
Adkins, W. D. (2009-2013). How to Calculate a Dividend Payment. Retrieved from http://www.ehow.com/how_4811547_calculate-dividend-payment.html#ixzz2Hl8TtOw4 United Continental Holdings, Inc. (2010). Annual Report. Retrieved from http://ir.unitedcontinentalholdings.com/phoenix.zhtml?c=83680&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTgwODYzNjMmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2010). Financial accounting (7th ed.). Hoboken, NJ: John Wiley & Sons. Retrieved from University of Phoenix eBook database