Their companies do most of the nations business even

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Their companies do most of the nation’s business. Even though only a small % of corporations actually sells stocks, it should be obvious that the limited liability of the stockholders would be a great advantage in raising capital. STOCKS AND BONDS Stockholders The owners of a corporation Bondholders Lend money to a company and are therefore creditors rather than owners This distinction becomes important when we consider the order in which people are paid off when the corporation is doing well and when it goes bankrupt. Stockholders Both preferred and common stockholders own the corporation but only common stockholders get to vote. Bondholders must be paid a stipulated percentage of the face value of their bond say 8% in the form of interest. Should a company go bankrupt, the bondholders, as creditors would have to be paid off before the owners of preferred and common stockholders. Prefer Paid a stipulated amount say 6% of the take value of the profit. The get paid first before common stock
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- 3 - Common They get paid last. They get to vote on who should run the corporation CAPITALIZATION AND CONTROL A Corporation is capitalized for a certain amount of money. Example: A $4 billion corporation may have $1 billion in bond, $500 million in preferred stock and $2.5 billion in common stock. Similarly, a corporation with $200 million in bonds, $100 million in preferred stock and $300 million in common stock would be capitalized at $600 million. Holders of common stocks control a company because of their power to vote. So if you hold more than 50% of the common stocks of a company, you control that company. However, because there are usually more common stockholders, with only a few holding. Even 1% of common stock the fact that many stockholders either don’t bother to vote or give power to others who will, usually, then, if you hold about 5% of common stock that will be sufficient for control. INVESTMENT The production of capital goods as opposed to consumption goods. The purchase of new plant, equipment, additional inventory, or residential housing. Plant Factories, office buildings, department and retail stores and shopping malls Equipment Assembly lines, machine tools, display cases, cash registers, computer systems, typewriters and office furniture. As long as they are purchased by the business. If you buy a car for personal use, it’s a consumption expenditure but if a business buys it for business use, it’s an investment. If your town buys a new police car, a new word processor, it’s a government expenditure. Something is consider investment if it adds to a firms plant, equipment or inventory.
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