Corporate Capital Structure

The corporate capital structure refers to the way a corporation is financed, including the types and amounts of capital it uses.

Types of corporate capital stock: Corporations can issue different types of capital stock, including common stock and preferred stock.

Common stock represents ownership in the corporation and entitles the holder to a share of the profits, as well as the right to vote on certain matters related to the corporation.

Preferred stock is a type of stock that typically has a higher claim on the corporation's assets and earnings, but usually does not have voting rights.

Issuance of stock for cash or non-cash consideration: Corporations can issue new shares of stock in exchange for cash or non-cash consideration, such as assets or services. The process of issuing new shares of stock is called a "stock offering."

Determining the par value of stock: Corporations must assign a par value to each share of stock issued. The par value is a nominal value assigned to a share of stock, typically a small amount such as $0.01 or $0.10. The par value does not represent the true value of the stock, but is used as a reference point for certain financial calculations, such as the minimum amount of capital that must be received in exchange for the stock.

Stock splits and stock dividends: Corporations can also increase the number of shares outstanding by issuing a stock split or a stock dividend. A stock split is a corporate action that involves dividing the existing shares of stock into a larger number of shares, while maintaining the total value of the shares. For example, if a corporation issues a 2-for-1 stock split, each shareholder will receive an additional share for every share they already own, doubling the number of shares outstanding. A stock dividend is a distribution of additional shares of stock to shareholders, typically in proportion to the number of shares they already own. Both stock splits and stock dividends can be used to increase the liquidity of the stock by making it more affordable for investors to buy.

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