Professional Documents
Culture Documents
Paid-In Capital
Chapter 11
Existence is Privately, or
separate from Ownership Closely Held
owners. can be
11-2
Advantages of
Incorporation
Limited personal
liability for
stockholders
Transferability of
ownership
Professional
management
Continuity of
existence
11-3
Disadvantages of
Incorporation
Heavy taxation
Greater regulation
Cost of formation
Separation of
ownership and
management
11-4
Formation of a Corporation
11-5
Rights of Stockholders
Voting (in person
or by proxy).
Proportionate
Rights distribution of
dividends.
Stockholders Proportionate
distribution of
assets in a
liquidation.
11-6
Publicly Owned Corporations
Face Different Rules
By law, publicly owned corporations must:
Prepare financial statements in accordance
with GAAP.
Have their financial statement audited by an
independent CPA.
Comply with federal securities laws.
Submit financial information for SEC review.
11-7
Stockholder Records in a
Corporation
Stockholder ledgers are often maintained by a
stock transfer agent or stock registrar.
11-8
Stockholders’ Equity of a
Corporation
S t o c k h o l d e r s ' e q
i n c r e a s e d i n t w o
C o n t r i b u t i oR n e s t e b n y t i o n
i n v e s t o r s i n ee x a c r nh ea dn g b e
f o r c a p i t a l s ct o o c r kp . o r a t
P a i d - i n C a R p ei t t a a l i n e d E
11-9
Preferred Stock
A separate class of stock, typically having
priority over common shares in . . .
Dividend distributions (rate is usually
stated).
Distribution of assets in case of
liquidation.
Common stock is
Accounting by
carried at original issue
the issuer.
price.
Investments in
Accounting by marketable securities
the investor. are carried at market
value.
11-11
Stock Splits
Companies
Companies use
use
stock
stock splits
splits to
to
reduce
reduce market
market
Ice Cream Parlor
price.
price.
Outstanding
Outstanding Stock Splits
shares
shares increase,
increase, Now
but
but par
par value
value is
is Available
decreased
decreased
proportionately.
proportionately.
11-12
Treasury Stock
Treasury
shares are
issued
shares that
have been
reacquired
by the
corporation.
11-14
End of Chapter 11
11-15