Chapter 11 Notes

Chapter 11 Notes - Chapter 11 Reporting and Analyzing...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 11 Reporting and Analyzing Stockholders’ Equity Corporation o Created by law o Legal entity o Has most of the rights and privileges of a person o Classified by purpose and ownership o Purpose – profit or nonprofit o Ownership – publicly or privately held Publicly Held Corporation . . . o Many have thousands of stockholders o Its stock is regularly traded on national securities markets Privately Held Corporation . . . o Usually has only a few stockholders and does not offer its stock for sale to general public Characteristics of a Corporation o Separate legal existence o Limited liability of stockholders o Transferable ownership rights o Ability to acquire capital o Continuous management o Government regulations o Additional taxes Separate Legal Existence o Separate and distinct from its owners o Acts under its own name o May buy, own, sell property; borrow money; enter into legally binding contracts; may sue or be sued; pays its own taxes o Owners (stockholders) cannot bind corporation unless owners are agents of the corporation Limited Liability of Stockholders o Creditors have recourse only to corporate assets to satisfy their claims o Liability of stockholders limited to their investments in their corporation o Creditors have no legal claim on personal assets of stockholders unless fraud has occurred o Stockholders’ losses limited to amount of capital invested Transferable Ownership Rights o Ownership evidenced by shares of stock
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
o Transfer of ownership among stockholders has no effect on corporation’s operating activities or assets, liabilities and total stockholders’ equity o Corporations does not participate in transfer of ownership rights after original sale Ability to Acquire Capital o Limited liability of stockholders couples with transferable ownership rights make it easy to raise capital Continuous Life o Life of corporation is stated in its charter- may be perpetual or limited to specific number of years (can be extended) o Corporation is separate legal entity, thus life not affected by withdrawal, death, or incapacity of a stockholder Corporation Management o The corporation established by- laws upon receipt of its charter from the state of incorporation o Stockholders manage corporation indirectly through board of directors o Board of directors o Formulates operating policies o Selects officers to execute policy and to perform daily management functions Corporate Organization Chart Forming a Corporation o A corporation can operate in carious states (must have a license from each state in which it does business) but can incorporated in only one state Stockholder Rights
Background image of page 2
o Once chartered, the corporation sells stock o If only one class of stock – called common stock o Ownership rights specified in the articles of incorporation or by-laws o Proof of stock ownership is a printed or engraved from known as a stick certificate Stock Certificate o Name of the corporation o Stockholder’s name o Class and special features of the stock o
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/17/2008 for the course MGMT 30A taught by Professor Tian during the Winter '08 term at UC Irvine.

Page1 / 10

Chapter 11 Notes - Chapter 11 Reporting and Analyzing...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online