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Chapter 35 Objectives

Define capital stock.

List the various types of stock and stock rights.

Explain what dividends are and how they may be paid.

Name the various laws regulating the sale of securities, exchanges, and brokers.

© 2002 West Educational Publishing To accompany Law for Business, 14e, by Ashcroft and Ashcroft

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Some definitions to know:Capital stock

Declared money value of a corporation’s outstanding stock.

Shares Individual units of capital stock.

Shareholder or stockholder Person who owns shares of stock.

Stock certificate Written evidence of stock ownership.

Corporations

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Classes of Stock

Common stock Simplest and most ordinary stock issued. Owners may vote in stockholders’ meeting. Have no voice in running of the corporation

beyond annual vote.

Preferred stock Receives preference to certain rights. However, owners give up certain rights:

• Right to vote in stockholders’ meeting• Right to participate in profits beyond

percentage fixed in certificate

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Preferred as to assets This is an advantage only in liquidation.

Preferred as to dividends Preferred stockholders receive dividends

before any common stockholders.

• Cumulative - dividends must be paid before common stockholders receive any dividends.

• Noncumulative - dividends have to be paid only for current year before common stock dividends are paid.

Preferred Stock

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Describe each kind of stock:Par-value stockNo-par-value stockTreasury stockWatered stock

How may stock be transferred?Define a stock option.

Kinds of Stock Let’sDiscuss Let’s

Discuss Let’s

Discuss Let’s

Discuss Let’s

Discuss Let’s

Discuss Let’s

Discuss Let’s

Discuss

Common Stock

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Laws RegulatingSales of Stock

2. SecuritiesAct of 1933

2. SecuritiesAct of 1933

1. Blue-Sky Laws1. Blue-Sky Laws

4. SecuritiesInvestor

ProtectionAct of 1970

4. SecuritiesInvestor

ProtectionAct of 1970

3. Securities Exchange

Act of 1934

3. Securities Exchange

Act of 1934

Explain the impact each piece oflegislation had on the sale of stocks:

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