A corporation is a large business not owned by individuals, but many stockholders own that. The
government must approve this type of business. Advantages: Easy to raise money, professional managers
run the company, stockholders are not responsible for losses, unlimited life, and easy to transfer
ownership. Disadvantages: Difficult and expensive to get government approval to start, stockholders have
no say in how the business is run, double taxation, and more government regulation. The price-earnings
ratio of a common stock is computed by dividing the stocks market value per share by its earnings per
share. The price earnings ratio represents the stock markets expectations of a company’s future
performance. Stock split: the par value per share decreases with a stock split but account balance does not
change. Stock dividend: does not involve cash, it is a distribution of more shares of the corporations stock.
Bonds are debts issued by companies or countries. Bonds have three characteristics that never change: Face
Value,
Maturity, and Coupon