Ch 11.1

Question 1

what are characterisitcs of a corporation

Answer 1

1. separate legal entity
2. limited legal liability of shareholders
3. transferabble ownership
4. able to acquire capital
5. continuous life
6. corporate management

Question 2

how is an org a separate legal entity

Answer 2

it can:
1. buy own and sell property
2. borrow money
3. enter into legally binding ocntracts
4. sue or be sued
5. pay own tax

Question 3

how can limited liability no longer exist

Answer 3

if an org is smaller, and a bank asks for collateral of the shareholders property

Question 4

how can an orgs ownership be transferred

Answer 4

sale of shares

Question 5

are transferring shares limited in a public corp? private?

Answer 5

no restricts in public

private may have some regualtions

Question 6

Whether public or private, the transfer of ownership rights between shareholders does not involve the corporation.

Answer 6

so a, l, and se UNCHANGED BY WHOHOLDS SHARES

Question 7

Does company record JE for transaction between shareholders?

Answer 7

no! only when it issues/sells shares to new investors or repurchases shares from investors

Question 8

how does an org have unlimited life

Answer 8

since sep legal ent, then continuance depends on the GOING CONERN!! not affeced by death or anything else

Question 9

what is a typical corporate organizatioon chart

Answer 9

Shareholders
->
board of directors
-> ceo and president
-> c suite
->treasurer and controller under CFO

Question 10

what are two ways canadian companies can incorporate

Answer 10

federally or provincially

Question 11

disadvantages of a corporation

Answer 11

increased cost and complexity to follow govt reguations

increased reproting and disclosure requirements

Question 12

what is the pros of having a corp

Answer 12

1. sep legal ent
2. limited liab
3. ease of transfer ownership
4. continuous life
5. sep manage and ownership
6. POTENTIAL FOR REDUCED INCOME TAX

Question 13

what are the 3 rights of common shareholders

Answer 13

1) vote to elect the board of directors, and vote on actions that require approval like electing an auditor

2) share coroporates earnings through RECIEVING dividends

3) share in assets upon liquidiation

Question 14

what does the shareholders right to share in assets upon liquidation mean

Answer 14

THIS IS A RESIDUAL CLAIM!!

IF A BUSINESS GOES OUT OF BUSINESS, LENDORS AND CREDITORS GET THE MONEY THEY ARE OWED

SHAREHODLERS WILL GET PROPORITONAL TO WHAT HEY DESERVE FROM WHAT IS REMIANING

Question 15

What is the formaulf ro share capital

Answer 15

common shares+preferred shares

Question 16

how does a company determine how much shares it is allowed to sell

Answer 16

this may either be limited or unliited, and it will be listed in articles of incorporation

Question 17

Most companies in Canada have an unlimited amount of authorized shares.

Question 18

Some companies will also authorize an unlimited number of preferred shares.

Question 19

The authorization of share capital does not result in a journal entry. It is the issue (sale) of shares by the corporation that must be journalized

Answer 19

word

Question 20

what is an initial public offering (IPO)

Answer 20

the first time a corporations shares are ofered for salae to the public

Question 21

what are issued shares

Answer 21

shares that have been sold

Question 22

after an IPO does the share price change?

Answer 22

yes! according to the interaction between buyers and sellers!!!

based on market forces

Question 23

what does a share price typically follow

Answer 23

the trend of a companys NET INCOME, dividends, and future

+ external market ocnditions

Question 24

market capitalization
-definition
-formula

Answer 24

measure of the fair value of a ocmpanys total equity

number of shares issued * share price
(at any date)

Question 25

what is the difference between retained earnings and share capital

Answer 25

retained earning:
-can eitehr be distributed as dividends or retained for operations

The share capital of most types of shares issued islegal capital that cannot be distributed to shareholders unless the shares are returned to the corporation and cancelled. Most shares are commonly known as no par value shares, which simply means that the shares have no predetermined value. Rather, the amount received by the company when issuing shares is considered to be legal capital that must remain invested in the company to protect corporate creditors.

Question 26

who approved declaring dividends

Answer 26

company board of dierctors