more stock, then it can have another IPO to sell new stock that will just add to the total amount of stock the company has on the market.
Looking at the different types of stock
Like most aspects of corporate finance, stocks come in many varieties, but no matter which type of stock your corporation has, its value increases or decreases based on the performance of your corporation. Here are three of the main stock types, along with their distinguishing characteristics:
Common stock: If you hold common stock in a corporation, you’re a partial owner, so you get to vote in any decisions regarding company policy, the board of directors, and many other issues. Keep in mind that to be brought to a vote, an issue usually needs to be instigated by one stockholder and then supported by others, at which point a voting form goes out to all stockholders of that company to fill out and return.Holding common stock also gives you rights to a share of dividend payments (profits returned to the company owners) when they’re issued, although this is optional. In case of company liquidation (selling assets after going out of business), common shareholders get whatever value is left over after the lenders and preferred shareholders get what they’re owed. Finally, holding common stock gives you the right to receive specialized reports or analytics from the company.
Preferred stock: If you hold preferred stock in a corporation, you get your dividend payouts in full before common shareholders get even a dime. That holds true for liquidation as well. As with common stock, being a preferred shareholder gives you the right to get information from a company. But the key difference between common and preferred shareholders is that preferred shareholders don’t have voting rights. So, although they have a right to the ownership and success of a company, they have no voice or control over the actions the company takes.
Treasury stock: When a company issues common shares of stock, it has the opportunity to repurchase those shares on the secondary market as any investor does. When a company does so, those common shares become treasury shares. The stock itself hasn’t changed at all; it’s just owned by the company that the stock represents. So, in essence, the company owns itself, which is only one step away from becoming completely self-aware and destroying us all! Companies tend to do this (buy treasury stock, not destroy us all) because they can generate income in the same way that many investors do, but buying treasury stock also allows them to manage their stock price more effectively.
Having Your Wish Granted
Depending on the type of industry you are in, and the interests of those with money, you might be eligible for grants. There are grants from different government organizations, grants from other businesses, grants from universities, grants from special interest groups, and so forth. Generally, they will tell you exactly the kind of work/project they are willing to provide grant function for, in addition to the requirements and process for applying. Ideally, you have an experienced grant writer assist you, but if not, then be prepared to present extensive budgeting and operating information and explain how you can best meet the needs of the organization providing the grant money.
Part 2
Making a Statement
IN THIS PART …
Learn the balance sheet to comprehend what a company is really worth.
Use the income statement to understand a corporation's income and costs.
Utilize the statement of cash flows to see how different activities earn or spend money.
Perform the vital basic calculations to make decisions based on the information in corporate financial statements.
Comprehend financial statement calculations that are important to investors and lenders.
Chapter 4
Staying Balanced
IN THIS CHAPTER
For every give, there is a take. For every expenditure or liability, there is an asset of equivalent value. All of business finance must be in balance, and this is reflected nowhere better than on the balance sheet. The balance sheet is a financial report that’s useful to anyone who has even the slightest interest in a business, including management, investors, lenders, business students, union representatives, and all other stakeholders. In short, the balance sheet includes important stuff, so pay attention to this chapter!
Introducing the Balance Sheet
The Securities and Exchange Commission (SEC) requires that all corporations maintain a balance sheet and highly recommends that any business keep one (the distinction being that corporations are publicly-owned companies that are legally required to fulfill these reporting obligations to its shareholders and other regulators).
After all, the SEC’s main purpose is to illustrate the exact value of a company in the very moment that the data are collected. Unlike other financial reports, the balance sheet doesn’t compile data over a period of time. Instead, it reports the value of all the assets the company currently has, divided into relevant categories, and then also includes the value of the company’s liabilities and owners’ equity, each divided in a manner similar to assets.
Here’s the basic formula for the balance sheet:
Assets = Liabilities + Owners’ equity
So the total value of all assets equals the total value of all liabilities plus all owners’ equity. If the two sides of the equation don’t
