Discussion Questions: Week Three
1. Why does a company choose to form as a corporation? What are the steps required to become a corporation? What are the advantages and disadvantages of the corporate form of doing business?
2. Why is preferred stock referred to as preferred? What are some of the features added to preferred stock that make it more attractive to investors? Would you select preferred stock or common stock as an investment? Why?
3. What are the different types of dividends corporations may issue? When should a corporation pay dividends? Do you prefer a stock dividend or a cash dividend? Why
4. Why do corporations buy back their own stock? What does it tell you about the corporation? What effect does the purchase have on the price of a company s stock?
5. Chen, Inc. purchases 1,000 shares of its own previously issued $5 per common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders equity? Chen, Inc s treasure stock is resold for $15,000. What effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders equity?