Corporate charter
- description of company's purpose
- articles of incorporation
- by-laws
- other material information at time of incorporation
Board of Directors
- elected by the stockholders/owners of the company
- advise the company
- appoint officers to carry out corporate policies
- if the board fulfills its duties successfully, members will be re-elected. Otherwise new members will be elected to take their place
Which of the following describes the owners of a corporation?
- The people who own shares of common stock in the company a.k.a. stockholders/shareholders. They rely on a company's management to make operational decisions for the company and to increase shareholder's value in the company
Capitalization
- company's sources of funds for long term use
- received from the sale of stocks
Debt capital
- through the sale of bonds
Earned surplus
- from retained profits
Equity
- means ownership,
- composed of preferred stock and common stock
- shareholders-owners of the corporation, number of shares owned = amount of ownership an investor has in the company
- common stock-establishes ownership and raises money to do business
- common stock is issued when a corporation issues it and the company receives money from the sale
- through the securities market-the seller or a broker/dealer receives money from the sale
- allows people to become owners of the company, earn income through dividends, profit from potential appreciation in the value of the stock
- as corporation becomes more profitable, the stock price increases, the value of common stock increases
- common stockholders take on a risk that the investment can decrease in value and even become worthless
- their liability risk is limited to only the amount they originally paid for the stock-the amount originally invested
- a corporation is not obligated to issue Preferred Stock-preferred stockholders have several rights that are unavailable to common stock holders but DO NOT have all the same voting rights
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