Stockholders' Equity

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Shareholder’s Equity

Shareholder’s equity is the net assets of a corporation (Spiceland, 2011). There are two different types of shareholder’s equity: stockholder’s equity and owner’s equity. Shareholder’s equity pertains to corporations while owner’s equity pertains to sole proprietorship. Owners of a corporation are called stockholders or shareholders, because they own shares of the company 's stock. Shareholder’s equity is the way of showing how much money a company uses is financed through shares of the company. The more money shareholders contribute to a company, the better a company will be able to operate. There are several reasons why people invest in companies. One reason is because he or she has a personal interest in the
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People who own common stock are able to elect the corporation 's directors. These stock holders are also able to receive distributions of a profit that a company makes in a year by a dividend. Dividends are the companies of sharing the profit of a company with the owners. Distributions of dividends are not mandatory for a company to payout, but most companies send them out because it encourages people to continue to purchase from a company.
Preferred stock is the stock that provides for preferential treatment of dividends. Preferred stock holders receive dividends before common stockholders (Glandon, 2010). Preferred stockholders typically receive a set amount of dividends per year. If a company is operating at a high profit, preferred stock holders receive less in dividends than a common stock holder. If a company is not operating at a high rate, the preferred stock holders will receive a higher return than the common stockholders.
There are several advantages and disadvantages to a company selling stock publically (Keiso, 2012). The advantage is that a company does not have to borrow all of the money they need to operate. The fact that the companies do not have to borrow money that they have to pay the money back and do not have to worry about paying an interest rate gives the company The second advantage is that company shares the risk. Not one person has all of the financial responsibility if a company does not succeed.
In summary, the shareholders equity
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