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Chapter 11 - appoint s employs elect Chapter 11 Ownership...

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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
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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 Treasury 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 Transaction 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:
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No-Par Value Stock: the capital stock that has no par value specified in the
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