Chapter13Slides

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Unformatted text preview: Click to edit Master subtitle style 4/7/11 ACCT 4050 Professor Dennis Chambers ACCT 4050 Chapter 13: Equity Financing 4/7/11 ACCT 4050 Equity Section 4/7/11 22 ACCT 4050 4/7/11 ACCT 4050 Corporate Ownership Corporation is a legal entity—considered an artificial person for the purposes of most legal actions Owners: Contribute capital and get shares of stock in return Represented by an elected Board of Directors Kinds of stock: Common stock Preferred stock 4/7/11 33 ACCT 4050 4/7/11 ACCT 4050 Common Stockholders “True” owners of the corporation Residual position Own all net assets after other obligations are paid Voting power Elect the Board of Directors that run the corporation Common stock Evidence of ownership interest in the corporation Par Value 4/7/11 44 ACCT 4050 4/7/11 ACCT 4050 Preferred Stock Superior position to common stock Preferred stockholders get paid before any common dividends paid Liquidation preference—if the corporation goes bankrupt, preferred shareholders get paid before common shareholders get anything Fewer rights than common stock Dividends usually fixed to a certain amount No voting rights—can’t vote for Board or in proxy votes Issued with a Par Value 4/7/11 55 ACCT 4050 4/7/11 ACCT 4050 Varieties of Preferred Stock Cumulative vs. Noncumulative Cumulative preferred dividends accumulate even if not declared or paid  All accumulated dividends must be paid before any common dividends paid Noncumulative preferred stock loses right to a dividend if it isn’t declared in a given year Convertible Preferred Shareholders have a right to convert their preferred shares into a set number of common shares 4/7/11 66 ACCT 4050 4/7/11 ACCT 4050 Issuance of Capital Stock for Cash Usually stock is issued in exchange for cash Example: Ajax Corporation issues 100,000 shares of common stock with par value of $1, for $20 per share Cash 2,000,000 Common Stock 100,000 4/7/11 77 ACCT 4050 4/7/11 ACCT 4050 Stock Issued for Other Than Cash Value stock issue at the fair value of the stock or the contributed asset or service, whichever is more evident Example: Ajax issued 1,000 shares of common stock with $1 par, in exchange for 500 hours of legal services. The attorney normally charges $100 per hour....
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This note was uploaded on 04/06/2011 for the course ACCT 4050 taught by Professor Rodney during the Spring '11 term at UGA.

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