Chap 11

Chap 11 - corporation; Common stock: Residual claimants of...

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Chapter 11 the firm and finical market 11.1 1. Proprietorship: Business enterprise owned by a single individual or household; 2. Partnership: A formal or informal agreement between two or more persons to operate or share the profits of a business enterprise; 3. Corporation: Business enterprise characterized by ownership dispersed among multiple shareholders; S corporation: A corporation that has fewer than 35 employees and no foreign or corporate stockholders; 4. Principle-agent problem: The situation that occurs when agents pursue their individual goals rather than those of the principle; 11.2 1. Stockholders: Entities that hold shares of stock in a corporation; 2. Preferred stock: A stock pays fixed, regular dividend payments despite the profits of the
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Unformatted text preview: corporation; Common stock: Residual claimants of corporate resources who receive a proportion of profits based upon the ratio of shares held; 3. Bonds: An obligation issued by the corporation that promises the holder to received fixed annual interest payments and payment of the principle upon maturity; 4. Plowbacks or reinvestment: The practice of using corporate profits for capital investment rather than dividend payouts; 11.3 1. Securities: Stocks and bonds; 2. Dividend: The annual per share payment to shareholders based upon realized profits; Price-earnings ratio (PE): A measure of stock value that is Price of stock/ Earning per share;...
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