Equity vocabulary part two, chapter one series 7 outline

• authorized stock, the maximum number of shares of stock that has been authorized to be issued by the corporate charter a)has to be registered with the SEC before being publicly sold to the future owners of the company b)existing stockholders must approve any amount of stock above the authorized amount
• incorporators, the original owners of the corporation who contribute the initial capital($) to start the business. They give themselves issues of the common stock in exchange for the money they invest, elect themselves to the board of directors and appoint themselves as officers
• corporate charter mandates a limit to the number of shares that can be issued
• unissued stock, additional shares that can be issued with the approval of the common stock holders
• issued stock-authorized stock that has been issued to shareholders in either private placements or public offerings-either outstanding stock or treasury stock
•  outstanding stock-shares of the company that are owned by investors. Have been issued, sold by company to employees or members of the public. Outstanding=issue stock-treasury stock, voting rights are only for owners of outstanding stock
•  treasury stock-shares of stock that have been issued by the corporation but repurchased by the company to reduce the amount of outstanding stock, no longer outstanding 1. no dividends, 2. no voting rights, 3. no electing board of directors
• Why do companies buy back stock? a)to distribute for stock option plans, b)for use in acquisitions and takeovers, c)to increase the earnings per share which should increase the market value of the outstanding stock, d)the market value of the stock will generally rise because there are less shares outstanding and buyers will then have a greater demand for shares of that company 

Equity vocabulary chapter one series 7 outline

Equity vocabulary chapter one series 7 outline

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