Midterm Review 1

Midterm Review 1 - Chapter 11 Characteristics of a...

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Chapter 11 Characteristics of a corporation 1) Separate Legal entitiy a. Acts as a separate corporation and not under the stockholders 2) Limited Liability for Stockholders a. No legal claim unless it involves fraud 3) Transferability rights a. The ability to sell or purchase more shares 4) Ability to acquire capital through the issuance of stock 5) Continuous life 6) Additional taxes a. Both the corporation and the stockholders are taxed—some call it ‘double taxing’ Stockholders Rights 1) Vote in election of board of directors 2) Share the corporate earnings through receipt of dividends 3) Keep the same percentage of ownership when new stock is issued 4) Share whatever assets the creditors and lenders didn’t receive upon liquidation Authorized Stock 1) Is the amount of stock a charter indicates they wish or are authorized to sell a. Consent must be given if a charter wishes to authorize additional stock for sale b. The authorization of common stock does not result in a formal accounting entry Issuance of Stock 1) A corporation can issue common stock a. Directly to investors b. Indirectly though an investment banking firm 9typical for publically held corporation Par and No-Par Value Stocks 1) Par value stock is capital stock that has been assigned a value per share 2) No-par value stock is capital stock that has not been assigned a value in the corporate charter Paid in Capital/Retained Earnings
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Midterm Review 1 - Chapter 11 Characteristics of a...

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