02 Corporation

Foundation¶

Founding starts by filing a charter with the state it wishes to incorporate

Ownership¶

There is no limit to number of shareholders, and thus amounts of funds is theortically

Before they list themselves,

1. Value the company
2. They make \(\le 49 \%\) available, to avoid a ‘hostile takeover’

Owner of stock can be called as:

• Shareholder
• Stockholder

Owners can expect (not promised - not legal obligation)

• capital gain

• dividend payments

The board decides [in consultation with CEO] whether to give out dividends or to re-invest

Funds¶

The capital structure of a corporation

• Debt & Bonds
• Equity = sum of all ownership value

This is one of the things naive investors are not aware. Dividend should not be a factor when evaluating a stock. Dividends actually make the value of your stock lower, as the equity has reduced. (Similar to Law of Conservation of Energy). Distribution of profits should not occur during times of expansion. A company giving dividends is a sign that it has ran out of expansion.

Double Taxation

• Dividend tax
• Capital gains tax

Refer Clientele Effect

Claim on Assets¶

1. Debt (Interest)
2. Preference Shares (Preference Dividends)
3. Owners/Common Shares (Dividends)

Debt & Bonds¶

Lenders cannot be owners of the corporation. Payment of interest is a legal obligation.

If company fails to pay interest, they have to file for bankruptcy. A legal authority comes in, and sells the company’s assets to pay off the debt/bonds

Company Summary¶

EBITDA (I was too shy to ask sir)

Clientele Effect¶

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