ch12 - PREVIEW OF CHAPTER 12 CORPORATIONS: Organization,...

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PREVIEW OF CHAPTER 12 CORPORATIONS: Organization, Stock Transactions, and Dividends Cash dividends Stock dividends Stock splits Dividends Corporate Organization and Stock Transactions Characteristics Forming a corporation Corporate capital Common stock issues Treasury stock Preferred stock
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Two common bases that are used to classify corporations are by purpose and ownership . A corporation may be organized for the purpose of making a profit , or it may be nonprofit . THE CORPORATE FORM OF ORGANIZATION
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Classification by ownership : 1 A publicly held corporation may have thousands of stockholders and its stock is traded regularly on a national securities market. 2 A privately held corporation (or closely held corporation ) usually has only a few stockholders and does not offer its stock for sale to the general public. THE CORPORATE FORM OF ORGANIZATION
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FORMING A CORPORATION The corporation receives its charter from government, and by-laws for conducting its affairs. Regardless of the number of places in which a corporation has operating divisions, it is incorporated in only one country .
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CORPORATE CAPITAL Owners’ equity in a corporation is identified as stockholders’ equity , shareholders’ equity , or corporate capital . The stockholders’ equity section of a corporation’s balance sheet consists of: 1 paid-in ( contributed ) capital and 2 retained earnings ( earned capital ).
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CORPORATE CAPITAL When a corporation has only one class of stock, it is identified as common stock . A printed stock certificate s erves as proof of stock ownership. The amount of stock that a corporation is authorized to sell and the par value of the stock are indicated in its charter.
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A corporation must choose whether to issue common stock directly to investors or indirectly through an investment banker ( brokerage house ) that specializes in informing prospective investors about securities. CORPORATE CAPITAL
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Investment banker may agree to underwrite an entire indirect stock issue. If so, the investment banker buys the stock from a corporation at a stipulated price and resells the shares to investors. The prices set by the marketplace determine a stock’s market value and they tend to follow the trend of a company’s earnings and dividends. CORPORATE CAPITAL
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Par value stock is capital stock that has been assigned a value in the corporate charter. Par value represents the legal capital per share that must be retained in the business for the protection of corporate creditors . No-par value stock is capital stock that has not been assigned a value in the corporate charter.
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This note was uploaded on 05/21/2011 for the course ACY 1111 taught by Professor Km during the Spring '10 term at CUHK.

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ch12 - PREVIEW OF CHAPTER 12 CORPORATIONS: Organization,...

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