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Shares of Stocks As Collateral

Stocks can be used as collateral for loans from banks and other lenders. Ownership in a corporation is represented by shares of capital stock, which are divided into fractional units. A stock certificate shows key ownership details like the company name, number of shares, owner's name, and authorized signatures. Stock ownership can be transferred freely through the sale of shares without approval of other shareholders. There are two main classes of stock: common stock represents the equity investment, while preferred stock carries limited dividends and preferences over common stock.

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388 views14 pages

Shares of Stocks As Collateral

Stocks can be used as collateral for loans from banks and other lenders. Ownership in a corporation is represented by shares of capital stock, which are divided into fractional units. A stock certificate shows key ownership details like the company name, number of shares, owner's name, and authorized signatures. Stock ownership can be transferred freely through the sale of shares without approval of other shareholders. There are two main classes of stock: common stock represents the equity investment, while preferred stock carries limited dividends and preferences over common stock.

Uploaded by

Misty Jean Pie Loayon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Shares of Stocks as Collateral

Shares of Stocks are used as collaterals to secure


loans from the banks and other financing
institutions.
Capital Stock
Ownership in a corporation is represented by its
capital stock. The capital stock is divided into
fractional units for convenience in transferring
ownership and distributing profits in the form of
dividends.
Stock Certificates
A stock certificate customarily has all the
following on its face:
a. Name of the company;
b. State of incorporation;
c. “Par value”, if par value stock; or “no-par
value” if no par stock;
d. Statement that the stock is “fully paid and
non-assessable;
e. Serial number;
f. Number of shares;
g. Name of the owner; and
h. Names of officers and others authorized to
sign for the company.
Ownership Evidenced by Transferable
Shares
The used of freely Transferable Shares permits a
stockholder to buy, sell, or disposed of his
interest in a corporation without approval of
other stockholders or of the corporation.
The two principal classes of capital
stock are: common and preferred
Common stock. Which represents the owners’
equity investment in corporate businesses, is the
basis and largest source of permanent financing.
Preferred stock. In contrast with common stock,
generally carries a limited dividend, specified
either as a percentage of par value or as fixed
number of pesos per year.
Preferred stock is a stock which entitles the
holder to some preference over some other
class or classes of stockholders. The preferences
may be given to preferred stock are:

a. Priority in the distribution of dividends,


and/or
b. Priority in the distribution of corporate assets
in case of liquidation.
Redeemable Preferred Stock
Is a stock which may be called or redeemed by
the corporation, usually in an amount exceeding
par or original issuance price.
Convertible Preferred Stock
May be exchanged for some other security of
the corporation at the option of the holder.
Par vs. Non-Par Value Stock
Both preferred and common stock may be par
value or non-par value stock, except that if the
stock is preferred as to assets in liquidating, it
must have a par value.
Par Value Capital Stock
Is a stock which has an assigned nominal value
per share appearing on the certificate of stock.
The par value establishes the minimum amount
that must be paid by each stockholder for the
share of stock.
Book Value Per Share
Book Value Defined. The term “book value per
share of stock” refers to the amount of
stockholders equity applicable to each share of
outstanding capital stock, as reflected in the
accounting records or related financial
statements at the date such value is determined.
Underlying Assumptions. The computation of
book value per share is based on the
assumption that the business is liquidated on
the date book value is determined, and the
assets are realized at the amounts appearing in
the accounting records ( or financial statements
) on that date without any loss or gain to the
corporation.
Uses of Book Value Per Share
1. To guide an investor in comparing the value
of one stock against another in establishing
the trend of market of stock.
2. If the stock is not quoted in the open market,
to serve as an index of the value of the stock.
3. To indicate increases or decreases in
stockholders’ equity per share of stock over a
period of

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