Multiple Choice
The total number of shares that a company may sell is referred to as:
12. Stockholders' Equity
Shares Authorized, Issued, and Outstanding
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Which of the following best describes shares of ownership in the assets and earnings of a business corporation?
A
Accounts receivable
B
Common stock
C
Bonds payable
D
Retained earnings
Verified step by step guidance1
Understand the concept of 'shares of ownership': Shares of ownership represent equity in a corporation, giving shareholders a claim to the company's assets and earnings.
Analyze the options provided: Accounts receivable, bonds payable, retained earnings, and common stock.
Clarify the meaning of each term: Accounts receivable refers to money owed to the company by customers, bonds payable are liabilities representing debt owed by the company, retained earnings are accumulated profits not distributed as dividends, and common stock represents ownership in the corporation.
Identify the correct term: Common stock is the term that best describes shares of ownership in the assets and earnings of a business corporation.
Conclude that common stock is the correct answer because it directly represents equity ownership in the corporation, unlike the other options which are either liabilities or internal accounts.
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