Newbie question about cash flow statements, and also about common stock.

Stock can be issued to purchase assets or pay expenses. Stock issuance doesn't always result in cash. Take a look at how CEO's are paid.

Rocinante, thats true, but I think I've asked the question the wrong way. Let me rephrase: I was under the impression that the only way to increase common stock on the balance sheet is to increase the number of outstanding shares in the company. Stock issued for purchases or for employee payment would increase the outstanding shares, right? Microsoft oustanding shares only increased by roughly 50 million in FY

James

Isn't common stock reported at par value instead of the fmv of $27 per share? Take a look at the paid-in-capital account (if it's reported). That is where the $17 billion is accounted for.

"Rocinante" wrote

Yup. There should be an adjustment to additional paid in capital (or some similar equity account) for the difference between par and market.

Rocinate, I appreciate your responses. Unfortunately, I don't see a paid-in-capital or similar row. I was under the assumption if there is no additional paid-in-capital line that there is no par value for the stock. Here is a direct link to the MSFT data. Total shares outstanding listed after the Total Liabilities & SE line, and right- most column is 2002 number:

Regards, James

The link you posted shows a more condensed balance sheet. The common stock and additional paid-in-capital accounts are combined into one line.

Here is a more fleshed out balance sheet from MS annual report that has more disclosure:

Companies leverage their equity quite often, but not past a point where they lose control.

disclosure:

Rocinate, even in the data you link to, I don't see how common stock & APIC number works. When you issue common stock, the common stock & APIC amount increases, correct? If that is true, then upon re- purchasing stock, shouldn't common stock & APIC always decrease? In the FY2006 Microsoft re-purchased 17 billion worth of stock according to the link you provided. Yet, common stock & APIC went from 60B to

More importantly, does the common stock & APIC number mean that as of

Regards, James

disclosure:

When a company buys back its own stock, it is then called "treasury stock." The treasury stock account is debited and the cash account is credited in such a transaction. APIC is not involved until the company re-sells the stock above or below cost. If the selling price equals the cost, then you would just debit cash and credit treasury stock. APIC is used to make up the difference between cost and selling price when selling stock.

Yes. I always thought it was a "cool" advantage that both corporations and investors enjoyed.