AFM391 Chapter Notes - Chapter 15: Leveraged Buyout, Authorised Capital, Treasury Stock

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Understanding the corporate form, share capital, and profit distribution. Most mid-large companies are in corporate form due to it being a separate legal entity for greater legal protection and access to capital markets. Corporations may be classified by nature of their ownership as follows: (1) public sector corporations (a) government units (municipalities, cities, etc. No shares issued) (b) government businesses enterprises (canada post, lcbo, other crown corporations. Common shares represents residual (basic) ownership interest in company: common sh control management through voting rights attached to shares, most profitable if company successful, not guaranteed annual dividends or assets on dissolution. Nature of preferred shares: usually gives priority on earnings/assets (upon dissolution), compared to common, they get assured dividend and priority for dissolution in sacrifice for voice in management or profits beyond stated rate. Features of preferred shares (1) cumulative: dividends on cumulative shares not paid in a given year called.

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