Corporations

Question 1

What is a shareholder?

Answer 1

Owners of a corporation.

Question 2

What is a share?

Answer 2

A unit of ownership in a corporation.

Question 3

What is share capital, or capital stock?

Answer 3

A general term for all types or classes of shares.

Question 4

How does a privately held corporation sell its shares?

Answer 4

It doesn’t offer its shares for public sale and usually has few shareholders.

Question 5

How does a publicly held corporation sell its shares?

Answer 5

It offers its shares for public sale and can have thousands of shareholders.

Question 6

What does public sale refer to?

Answer 6

Trading in an organized stock market.

Question 7

What does progressive tax mean?

Answer 7

Higher income levels are taxed at higher rates, lower income levels are taxed at lower rates.

Question 8

What are authorized shares?

Answer 8

The total number of shares allowed to be sold.

Question 9

What are organization costs?

Answer 9

The costs of organizing a corporation.

Question 10

What is a proxy?

Answer 10

A document signed by a shareholder to delegate voting rights to an agent.

Question 11

What is a charter?

Answer 11

It authorizes the number and types/classes of shares to be issued.

Question 12

What is equity financing?

Answer 12

The selling or issuing of shares. Assets are increased (financed) through shareholder (equity) investment.

Question 13

How does a corporation sell their shares directly?

Answer 13

They advertise directly to potential buyers, which is most common with privately held corporations

Question 14

How does a corporation sell their shares indirectly?

Answer 14

They pay a brokerage house (investment banker) to issue its shares

Question 15

Market value per share

Answer 15

The price at which a share is bought or sold.

Question 16

What are dividends?

Answer 16

Sharing profit with the shareholders of the company.

Question 17

What is the date of declaration?

Answer 17

The date the directors vote to pay a dividend, which creates a legal liability.

Question 18

What is the date of record?

Answer 18

The future date specified by directors for identifying those shareholders to receive dividends.

Question 19

What is the date of payment?

Answer 19

The date when shareholders receive payment.

Question 20

Dividend preference

Answer 20

Dividends must be paid first to preferred shareholders, then to common shareholders.

Question 21

Cumulative preferred shares

Answer 21

Have the right to be paid current and all prior periods’ undeclared dividends before dividends are paid to common shareholders.

Question 22

Dividend in arrears

Answer 22

Unpaid dividends.

Question 23

Non-cumulative shares

Answer 23

Have no right to prior periods’ unpaid, undeclared dividends.

Question 24

Retained earnings

Answer 24

Income to date that has been kept for the purpose of reinvestment.