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

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

3. TERMINOLOGY l 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 l 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. l Stated Value »Similar to par value except it is not printed on the face of the stock certificate.

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

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

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

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

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