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Stock Market Game

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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Stock Market Game

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  1. Stock Market Game

  2. 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

  3. Partnership • 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

  4. Limited liability Partnership • Transfers much of the firm’s personal liability from the partners to the partnership

  5. 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

  6. 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

  7. 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

  8. 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

  9. Stocks • 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

  10. Stock Exchanges • 3 Major stock markets • NYSE – New York Stock Exchange • NASDAQ – National Association of Securities Dealer Automated Quotation • AMEX- American Stock Exchange

  11. Types of Stock • Common Stock • Preferred Stock

  12. 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

  13. Preferred Stock • Guaranteed dividend • No voting rights

  14. Regulating Agency • Securities and Exchange Commission (SEC)

  15. 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

  16. Corporations • Registered by a state and operates apart from its owners • Three Types • C-Corporation • S-Corporation • Non-Profit Corporation

  17. 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

  18. C-Corporation • 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)

  19. C-Corporation • 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. Limited Liability Company • Company whose owners and managers enjoy limited liability and some tax benefits, but it avoids some restrictions associated with S Corporation

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