1. Corporations 7.3 Corporations—Are companies that are formed as legally distinct from their owners and are treated as if they were individuals. Can: Hire workers, make contracts, pay taxes, sue and be sued, make & sell products.

2. Forming a Corporation 7.3 1. Must apply for a state license known as the: articles of incorporation. Includes: name and purpose of corp. Address and headquarters Amount of $ it expects to raise Names and addresses of officers Length of time expected to exist License granted is called: corporate charter

3. Corporate Structure 7.3 Structure: Owners/Shareholders Board of Directors Corporate Officers Vice Presidents Department Heads Employees

4. Organization Chart

5. Corporate Finances 7.3 Stock—Shares that represent ownership of the firm. Shares—Portions(certificates) issued. Dividends—Profits paid to shareholders. Common Stock—Allowed to vote Preferred Stock—Guaranteed dividends; paid before common stock. No vote.

6. Corporate Finances 7.3 Corporate Bond—Certificate issued by a corporation in exchange for money borrowed. Principal—The actual amount of money borrowed. Ex. Buy $10,000 @5% interest Principal=$10,000 X 5%= $500 per year income Interest—Amount borrower must pay for the use of the principal.

7. Advantages of Corporations 7.3 :Benefits to stockholders— 1. Limited Liability 2. Can sell their shares at any time Benefits for Corporations: 1. Limited liability 2. Separation of ownership from management. 3. Capital can be raised easily 4. Longevity

8. Disadvantages of Corporations 7.3 1. Corporate charter can be expensive and difficult to obtain. 2. Government regulation 3. Slow decision making process 4. For stockholders—Stockholders can earn a profit, without working for corp. 5. Corporate profits are taxed twice.

9. The Securities Language Market cap = market capitalization (price per share X number of shares outstanding). Ticker symbol = letters assigned to a particular stock. Ex. Microsoft = MSFT Stock broker = work for firms that specialize in the buying and selling of stock. Earn a profit by collecting commission and fees for each transaction. IPO = Initial Public Offering – when a stock first goes public. Google’s was $85 in 2004 As of 2009? $490

10. Market Capitalization P rice per share X the number of outstanding shares. (Ex. $10/share X 1,000,000 shares=$10 million market capitalization. Large cap. Greater than 10 billion dollars in market cap. Mid cap. Between 1 billion and 5 billion dollars market cap. Small cap. 1 billion dollars or less in market cap.

11. A Few Exchange Facts NYSE Started in 1792 with 24 brokers First stock was Bank of New York To be listed: company minimum worth of $60m and $2m earned per year for last 2 years

12. Ticker Symbols Letters assigned to a particular stock. NYSE - generally 1 to 3 letters. NASDAQ - generally 4 letters. Examples: T = AT&T. INTC = Intel. TXN = Texas instruments. IBM = IBM.