Capital Structure Flashcards
Debt Security
a security in the form of debt owed by the corporation to the holder of the debt. Basically, a debt security is an IOU to the holder of the debt.
Do holders of debts securities have an ownership interest in the corporation?
no
Bond
a secured debt security.
Debenture
an unsecured debt security.
Equity Securities
a share in the corporation.
Do holders of shares have an ownership interest in the corporation?
yes
Authorized Shares
shares described in the corporation’s articles of incorporation.
Issued Shares
shares that have been sold by the corporation.
Outstanding Shares
shares that have been sold by the corporation.
Authorized by unissued shares
shares of the corporation that have been repurchased or redeemed by the corporation.
Common Shares
a type of share where each holder of a common share has an equal ownership right in the corporation.
Can shares be divided into classes?
yes
Share Option
an option where a person can choose to purchase shares in the future under terms predetermined by the board of directors.
Do share options require consideration?
yes, since they are an option and options require consideration.
What kind of consideration can be given for a share option?
any tangible or intangible value, including a promise to do something or pay something in the future.
Stock Subscription
a promise from a subscriber to buy stock in the corporation.
Under RMBCA, how long is a stock subscription irrevocable?
six months
When must payment for a stock subscription be made?
upon demand of the board.
Under RMBCA, must stock be paid for at par value?
no, it can be paid for in whatever valuable consideration the directors deem appropriate.
