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Stock Market Game. What is a Company. Company – A business or association usually formed to manufacture or supply products or service for profit. Can be: Partnership Limited Liability Partnership (LLP) Corporation Sole Proprietor. Partnership.

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what is a company
What is a Company
  • Company – A business or association usually formed to manufacture or supply products or service for profit.
    • Can be:
      • Partnership
      • Limited Liability Partnership (LLP)
      • Corporation
      • Sole Proprietor
  • In a partnership – Partners share the profits or losses of the business in which they have invested
  • Personally liable for company debt
  • Your assets (things that you own) will cover the company debt
limited liability partnership
Limited liability Partnership
  • Transfers much of the firm’s personal liability from the partners to the partnership
public corporation
Public Corporation
  • Is a company with publicly traded shares that anyone can buy in a stock market.
  • Is also legally separated from the stockholders (people that own the stock) and the managers that run it
  • Stock holders own the company
corporation advantages
Corporation Advantages
  • Stockholders are not responsible for the company’s debt
  • A corporation continues to exist even if the stockholders or managers change
  • Stockholders can easily sell their ownership shares through the stock market
private corporation
Private Corporation
  • May be owned by an individual
  • Or privately sell stocks to fund the business
  • Stocks are not sold publicly on the stock market
sole proprietor
Sole Proprietor
  • Company is owned and run by one individual who receives all of its profits and bear all of its losses.
  • Owner is personally liable for all of the companies debt
  • Initial Public Offering – IPO
    • Initial sale of stock to the public by investment bankers
  • Underwriter – Investment banker that buys an entire new securities issue from a company and resells it
stock exchanges
Stock Exchanges
  • 3 Major stock markets
    • NYSE – New York Stock Exchange
    • NASDAQ – National Association of Securities Dealer Automated Quotation
    • AMEX- American Stock Exchange
types of stock
Types of Stock
  • Common Stock
  • Preferred Stock
common stock
Common Stock
  • Shares of the company do not guarantee a dividend (Part of the companies profit that are shared with the stockholder)
  • Dividend may be more then preferred stock holders
  • Right to vote for Board of Directors
  • Right to vote at Annual Meeting
preferred stock
Preferred Stock
  • Guaranteed dividend
  • No voting rights
regulating agency
Regulating Agency
  • Securities and Exchange Commission (SEC)
stock terms
Stock Terms
  • Earnings – The amount of money that remains after subtracting the companies expenses from its revenue
  • Investor – Someone who risks funds with the hope of it increasing in value
  • Registered by a state and operates apart from its owners
  • Three Types
    • C-Corporation
    • S-Corporation
    • Non-Profit Corporation
c corporation
  • Pays taxes on earnings
  • Shareholders pay taxes as well
  • File Certificate of Incorporation with the state
  • Issue stocks
    • Shareholders – Owners of Corporation
  • Required to have a Board of Directors
c corporation1
  • Advantages
    • Status – Corporations get help getting loans
    • Limited Liability – Only liable up to the amount of their individual investment
    • Perpetual Existence – Continuous life
    • Owners can create pension and retirement funds and offer profit sharing
    • Tax Advantage – Deduct certain expenses from their reported income (Salaries and Contribution to benefit plans)
c corporation2
  • Disadvantages
    • Expensive to start up – Cost $500 to $2500 to create
    • Taxed – Corporations income is heavily taxed
      • Corporation pay tax on profits
      • Shareholders pay tax on dividends
subchapter s corporation
Subchapter S Corporation
  • Taxed like a partnership
    • Avoids double taxation
  • Advantage
    • Profits taxed only once at shareholders personal tax rate
    • S Corp is not a taxpaying entity
subchapter s corporation1
Subchapter S Corporation
  • Disadvantage
    • Can have no more than 75 stockholders who must be US citizens
    • Only have one class of stock
    • Cash businesses are S Corps
      • If business produces enough cash, the form works
      • If business shows a large taxable profit but has not generated enough cash to cover the taxes, the owners must pay out of their earnings
nonprofit corporation
Nonprofit Corporation
  • Businesses that benefit certain causes in the community
  • Make money for reasons other than the owner’s profit
  • Business can make profit, however, the profit must remain within the company and not be distributed to shareholders
limited liability company
Limited Liability Company
  • Benefits
    • Simpler to start up than a corporation
    • Allows for flexibility of a partnership structure
    • Protects it owners with the limited liability of a corporation
    • Not subject to double taxation
    • Not limited on the number of members or their status
limited liability company1
Limited Liability Company
  • Company whose owners and managers enjoy limited liability and some tax benefits, but it avoids some restrictions associated with S Corporation