COMMERCE 1AA3 Lecture Notes - Lecture 34: No Liability, Legal Personality, Treasury Stock
30 Nov 2016
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Resources of funds: liabilities and equity, equity is the owners" funding. A company has no obligation to pay out dividends: liabilities are the creditors" funding. Entitled to receive interest on their loans. The company has an obligation to pay interest on its debts: a claim against assets means that they have rights over the companies assets in the case of liquidation. In exchange, owners run the company whereas creditors do not. Uses of funds: assets, cash and accounts receivable: chapter 5. Inventory: chapter 6: long-term assets: chapter 7. Separate legal entity: no liability, an advantage. Has most of the rights and privileges of a person. Classified by purpose and ownership: purpose: profit or non-profit, ownership: public or private. Characteristics: separate legal existence, limited liability - cannot lose more than their investment, transferable ownership rights, ability to acquire capital. Can raise almost unlimited funds: continuous life, corporation management, government regulations. A lot easier to raise money: corporate management.
