BUS 23 Lecture Notes - Lecture 3: Investment, Preferred Stock, Common Stock
23 Nov 2020
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Firm gets equity financing by selling new ownership shares (external financing) by retaining earning (internal financing) Common stock - security that represents ownership interest in corp. Comp first sale of stock to public = initial public offering (ipo) Ipo enables existing stockholders to earn big profits of investment. Drawbacks of going public: no guarantee ipo will sell, expensive to get into, reveal info (operating/financial data, product details, financial plans, operating strategies) Dividends - payment to stockholders from corp profits. Stock dividends - payments in form of stock. Preferred stock - dividend amount that"s set at time stock is issued: dividend has to be paid before company can pay any dividend to common stockholders. If firm goes bankrupt, preferred stockholders can get 29845 back before common holders. Most often used by small & growing firms that aren"t big enough to sell securities to public. Invest in new businesses in return for part ownership.
