Equity and Investments

Over week three we have read chapters 10 and 11. Our first week was based on learning about equity and investments. We discussed corporations and the steps a company must take to become a corporation. A company chooses to become a corporation in a legal meaning being a separate entity and become its own. A corporation must be made by law and the company must continue to abide by procedures to stay at a corporation status. There are steps a company must take to become and sub staging corporation status. First is the name and purpose of the corporation needs to be established. Second, capital stock shares need to be authorized. Three, names of incorporators need be identified. Fourth and last are shares of stock need to be subscribed.

The first week we also discussed debt, stock securities and stock investments. Companies purchase to invest in debt and stock normally for three different reasons. The first reason is that the company may have excess cash and they invest it to earn more profits. Second, is companies strategically purchase investments to generate earnings from investment incomes. Last and third, is companies invest to enhance their operations in one or more ways. A stock investment is an ownership of part of a company and represents a claim of a portion of the company's earnings and assets. Within an investment stock there are two different stocks one is common and the other is preferred. Common stock allows the owner of the stock to vote at shareholder meetings and receive dividends. Preferred stock normally does not have voting rights like common stock; however it shares a higher claim on earnings and assets.