Remember civics class, when your teacher would drone on about the U.S. constitution? Well, America isn't the only thing with a founding document that lays out its general governing structure. Corporations have the same kind of foundational paperwork.
These docs are called articles of incorporation and they lay out the basic outline of how the company is set up.
One of the items included in these basic documents is the authorized share capital. This designates the amount of stock that a company can create. The term encompasses all the ownership shares that can exist.
The authorized share capital creates the company's pool of stock that can then get distributed as needed. From there, management can issue shares for founders, shares to sell in order to raise capital, shares to make acquisitions or shares to use as stock incentives for employees - basically for any other purpose that seems prudent.
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Finance: What is Common Stock?379 Views
Finance a la shmoop what is common stock well, common stock
simply put is ownership common stock ownership is a foundation of what [Businesssmen and women in a meeting fighting for control]
comprises control in a corporation it's the common stock that elects the board
of directors who then hires the CEO who then you know hires everyone else so [The organizational chart of a corporation]
yeah when someone owns a share they own a teeny tiny piece of a company the more
shares they own well the more of a voice they have in the management of that [Company building crumbles to the floor]
company so someone who has 51% of the shares in a company will actually have a
lot to say in the election of a Board of Directors for example where someone with [Member of the board with 51% shouting orders at other members]
the small percentage of shares still has a voice but it's a small squeaky one in
a bankruptcy situation common stock sits at the very bottom of the stack of
priorities in being paid back a company that's going bankrupt will start by [Examples of priority stack with IRS obligations first]
paying any IRS obligations, yeah the IRS always wins then they'll pay
employees their salaries and they'll pay any vendors who are owed money then
they'll pay off bank loans and they'll pay back preferred stock and finally at
the very bottom there if there are a few nickels and dimes left over they'll pay [Man emptying nickels and dimes from jean pocket]
common stockholders back but shares you hear quoted from Apple and Amazon and
bathmats are us are all just common stock being traded on NASDAQ or the New [Apple, Amazon and Bathmats R Us stock prices displayed on NASDAQ screens]
York Stock Exchange or other places which are owned by millions and millions
of common and uncommon people [A strange person wearing shoes for gloves in a busy office]
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