Chapter 11 - employs appoints elect Chapter 11 Ownership of...

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Unformatted text preview: employs appoints elect Chapter 11 Ownership of a corporation • Corporation is the only business form the law recognizes as a separate entity. • Corporation enjoys a continuous existence separate and apart from its owner • Corporate are created by application to a state government, on approval of application, the state issues a charter, sometimes called the articles of incorporation • Corporations are governed by a board of directors elected by the stockholders Benefits of Stock Ownership • When you invest in a corporation, you are known as a stockholder or shareholder • You receive shares of stock that you subsequently can sell on established stock exchanges Owners of common stock receive a number of benefits: • A voice in management you may vote in the stockholders’ meeting on major issues concerning management of the corporation. • Dividends you receive a proportional share of the distribution of profits • Residual claim you will receive a proportional share of the distribution of remaining assets upon the liquidation of the company • Owners attend annual meetings and are able to vote. • Most owners don’t actually attend so they get a notice with a proxy card for a ballot • Stockholders have ultimate authority in a corporation Authorized, Issued, and Outstanding Shares • The corporate charter specifies the maximum number of shares that can be sold to the public • The financial statement must report info concerning the number of shares that have been sold to date. Authorized Number of Shares: the maximum number of shares of a corporation’s capital stock that can be issued as specified in the charter Issued Shares: represent the total number of shares of stock that have been sold T reasury Stock: bought back stock Outstanding Shares: refers to the total number of shares of stock that are owned by stockholders on any particular date • Number of shares outstanding and issued shares differ in number of treasury stock Earnings Per share = net income/ average number of common shares outstanding Compares earnings…. Within years and with other companies Common stock T ransaction • Most corporations issued two types of stock, common stock and preferred stock. All corporations must issued common stock, but only some issue preferred stock Common Stock: is the basic voting stock issued by a corporation • When the company is doing well, higher dividends can be paid and therefore present value of its common stock will increase Par Value: is the nominal value per share of capital stock specified in the charter; serves as the basis for legal capital • Original purpose of this requirement was to protect creditors by specifying a permanent amount of capital that owners could not withdraw before bankruptcy Legal Capital: is the permanent amount of capital defined by state law that must remain invested in the business; serves as a cushion for creditors Some states require: No-Par Value Stock: the capital stock that has no par value specified in the...
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This note was uploaded on 02/02/2010 for the course BCOR 2000 at Colorado.

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Chapter 11 - employs appoints elect Chapter 11 Ownership of...

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