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48 Cards in this Set

  • Front
  • Back
types of business organizations
-individual sole proprietorship
-partnership
-corporation
capitalization
how corporations raise money
2 ways a corporation raises money to finance its operations
-debt securities
-equity securities
equity capital
stock
debt capital
bonds
total capitalization
equity plus the debt capital
net worth or stockholders equity
equity capital raised by the sale of common and preferred stock plus the retained earnings
retained earnings or earned surplus
profits the corporation made on the sale of its product or service which have not been distributed as dividends
incorporators
original stockholders; owners
How is ownership in a corporation represented?
equity securities (stock)
stock
unit of corporate ownership
What does a corporation operate under?
a charter granted by the state
What must incorporators file?
a certificate of incorporation with proper state officers
7 rights of common stockholders
-right to receive a stock certificate for full paid stock
-right to share in corporate profits when dividends declared
-right to voice their stock at stockholders meetings
-right to transfer stock at will
-limited access to the corporation's books
-pre-emptive right to subscribe to new stock
statutory (regular) voting
must split votes evenly
cumulative voting
-may cast votes in any manner
-benefits minority interests
What are the 2 broad classes of equity securities?
-common stock
-preferred stock
How much is common stockholder personally at risk for?
the amount invested in the corporation
authorized shares
the specific number of shares, authorized in the corporate charter, to be sold
issued shares
authorized stock that has been sold to investors
unissued shares
authorized stock that has not yet been sold
outstanding stock
issued shares currently in the hands of investors
market capitalization
-indicates the total value of the shares of a company
-multiply current price
of shares of the
common stock by the
number of shares
outstanding
How are companies generally categorized in regards to market capitalization?
-large cap - market capitalization exceeds $5 billion
-mid cap - market capitalization between $1 billion and $5 billion
-small cap - market capitalization under $1 billion
treasury stock
-common stock a corporation has reacquired or bought back
-not considered outstanding
-does not vote nor receive dividends or used for earning calculation purposes
par value (stock)
-arbitrary value placed on the common stock at the time the stock is authorized
-nothign to do with the market price of the stock
No Par Stock
-has no par value
-stock is carried at a Stated Value on the corporation's financial records
American Depositary Receipt (ADR)
-method by which an investor usually purchases stock of foreign corporations
-everything done with US dollars in the English language
warrant
-an inducement attached to new securities
-can be purchased in open market
-gives the purchaser a long-term (5 to 10 years) privilege of subscribing to one or more shares of stock reserved for him by the corporation from its unissued or treasury stock reserve
-predetermined fixed price
options
-call
-put
call option
right to buy stock
put option
right to sell stock
restricted stock
-called Private Placements
-corporations raise money privately
-selling to one or two large institutional buyers
-can have up to 35 investors to remain private
-
Private Placements
-restricted stock
-distribution of unregistered securities to a limited number of purchasers without the filing of a registration statement with the SEC
-generally require submission of an investment letter to the seller by all purchasers
-restricted from resale for period of one year
statutory underwriter
-aspect of Private Placement
-an individual or corporation that purchases an unregistered security and offers it in a public distribution without an effective registration statement
-such parties are subject to fine and/or imprisonment
stock split
-if a corporation has 1,000,000 shares of common stock outstnading selling for $80 per share, it may declare that on such and such a date the stock will split 2 for 1
-on the date indicated, the company will have 2,000,000 shares outstanding at half the par value, and each stockholder will have twice as many shares as he had before the split
stock dividend
-share of the corporate earnings
-after receiving, investor has more shares, same proportionate interest
Describe how stock dividend works?
-10% stock dividend means that for every 10 shares of common stock outstanding, one new share will be given as a dividend to the stockholders
-if a corporation with 100,00 shares of common stock outstanding declares a 10% stock dividend, it then has 110,000 shares outstanding
preferred stock
-preference in claims to dividends and assets ahead of common stockholders
-dividends paid at a fixed rate
-par value is important to investors because it is the figure upon which the dividend is usually calculated (percentage of par)
-no par value, dividend stated as a fixed number of dollars per year
cumulative preferred stock
-dividends accrue for years skipped
-run for indefinite period of time
noncumulative dividend
-if a corporation skips a dividend payment, the investor receives nothing for that quarter and has no further claim upon the corporation's earnings
convertible preferred stock
-convertible privilege attached at time of issuance
-can be changed into fixed number of shares of common stock
callable (preferred stock)
permits the corporation to redeem (buy back) its preferred stock at a fixed price from the investors
call price (preferred stock)
-feature of preferred stock through which it may be retired at the corporation's option by paying a price equal to or slightly higher than either the par or market value
-stated on certificate at time of issuance
participating preferred stock
-the only preferred stock that, in addition to a stated fixed dividend, is also eligible to participate in the common stock dividend
prior preferred
-ranking of preference and degree of preference upon corporate dissolution
-all preferred ranks ahead of common stock but behind debt securities
transfer agent
-responsible for the efficient transfer of securities from one owner to another
-may be a bank, trust company, or issuer itself
-keeps the list of owners of record
stock power
sign this document instead of the back of a stock