17 Questions
What is the first step in forming a corporation?
Filing the articles of incorporation with the state government
What is the main difference between common stock and preferred stock?
Dividend priority
In accounting terms, how is equity defined?
The total assets minus total liabilities
Under equity categories, which of the following best describes 'retained earnings'?
Profits reinvested back into the business
Which type of corporation is known for having a small number of shareholders who are often involved in managing the business?
Privately held (closely held) corporation
What key information is typically included in a corporation's application for incorporation?
The company's name and purpose, amount and types of shares authorized, names of incorporators and their subscribed shares
What is the primary characteristic of common stock (ordinary shares) in a corporation?
Represents basic ownership interest with ultimate risk of gains and losses
How does preferred stock (preference shares) differ from common stock in terms of dividends?
Has contractual provisions for priority dividends over common stockholders
What is equity defined as in a corporation?
Residual interest in assets after deducting liabilities
What does Contributed capital (paid-in capital) in equity represent?
Paid-in capital provided by shareholders for investment
Which category does Earned capital (retained earnings) fall under in equity classification?
The capital that develops from profitable operations over time
What does a corporation consider when setting the price of a new issue of stock?
Expected future earnings, dividend rate, current financial position, state of the securities exchange market, and state of the local economy.
What is the difference between authorized shares and issued shares in a corporation?
Authorized shares are the maximum number a corporation is allowed to sell, while issued shares are those distributed to shareholders.
What defines treasury shares in a corporation?
Shares that are reacquired by the corporation to reduce the number of outstanding shares on the open market.
What is the formula for calculating outstanding shares in a corporation?
Outstanding shares = Issued shares - Treasury shares
What characterizes a par value share in a corporation?
Shares that are issued at a specific value per share in the certificate of incorporation.
What distinguishes a no-par value share from a par value share?
No-par value shares have no assigned value per share in the certificate of incorporation.
Learn about the steps involved in incorporating a company, including naming, share authorization, and founder details. Understand the significance of obtaining a charter after meeting government requirements.
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