08 Equity - 27/01/2011 EngineeringFinanceand Economics...

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27/01/2011 1 1 Engineering Finance and Economics 8. Shareholder’s Equity 2 9 2 What Is the Best Way to Organize a Business? Proprietorship Partnership Corporation 3 9 3 Characteristics of a Corporation Separate legal entity Continuous life and transferability of ownership Limited liability Separation of ownership and management Corporate taxation Government regulation
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27/01/2011 2 4 Advantages and Disadvantages of a Corporation Advantages Can raise more capital than a proprietorship or partnership can Continuous life Ease of transferring ownership Limited liability of shareholders Disadvantages Separation of ownership Corporate taxation Government regulation (e.g. transparency to competitors) 5 Authority Structure of a Corporation Shareholders Board of Directors Chief Executive Officer (CEO) Executive 6 Classes of Shares Common Shares The most basic form of capital issued by corporations Preferred Shares A class of shares that has several preferences over common shares
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08 Equity - 27/01/2011 EngineeringFinanceand Economics...

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