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CORPORATION

CORPORATION. A business organized as a legal entity separate and distinct from its owners. Chartered by the state with ownership divided into shares of transferable stock. Stockholders have limited liability. STOCKHOLDERS’ EQUITY.

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CORPORATION

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  1. CORPORATION • A business organized as a legal entity separate and distinct from its owners. • Chartered by the state with ownership divided into shares of transferable stock. • Stockholders have limited liability.

  2. STOCKHOLDERS’ EQUITY • Residual interest in the assets of an entity that remain after deducting its liabilities • Assets minus Liabilities • Ownership Interest • Consists of: 1. Contributed (Paid-in) Capital 2. Retained Earnings

  3. TERMINOLOGY • Legal Capital • The amount of stockholders’ equity that cannot be distributed to stockholders. • Usually the total par value or stated value of the issued stock.

  4. TERMINOLOGY • Par Value • An arbitrary amount printed on the face of the stock certificate. • In most states, represents the minimum amount per share to be invested in the corporation when shares are originally issued. • No direct relationship to market value. • Stated Value • Similar to par value except it is not printed on the face of the stock certificate.

  5. TERMINOLOGY • Authorized SharesThe maximum number of shares the company is allowed to issue. • Issued SharesThe number of shares sold as of a specific date. • Outstanding SharesThe number of issued shares still held by stockholders as of a specific date.

  6. COMMON STOCK • Voting Rights • Share proportionately in profits and losses • Share proportionately in corporate assets upon liquidation • Preemptive Right

  7. PREFERRED STOCK: STANDARD FEATURES • No Voting Rights • Fixed dividend rate • Liquidating preference over common stock • Dividend preference over common stock

  8. PREFERRED STOCK: OPTIONAL FEATURES • Cumulative • Callable • Participating • Convertible • Redeemable

  9. TREASURY STOCK • A corporation’s issued stock that has subsequently been repurchased but not retired by the corporation. • Issued Shares minus Outstanding Shares • Why?

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