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Accounting Essay

976 words - 4 pages

PRIVATE AND PUBLIC COMPANIES
A company is any entity engaging in business, such as a proprietorship, partnership, or corporation.
A company is a private company if by its Regulations, it fulfills the following conditions:
• Where it is a company registered with shares, there is a restriction of the right to transfer shares

• The total number of members and debenture holders do not exceed 50. This number excludes genuine employees and ex-employees of the company who became members or debenture holders during their employment, and continued to be so after their employment. The exclusion of employees is designed to enable companies to institute co-partnerships schemes without forfeiting ...view middle of the document...

 For example, certain corporate structure changes and amendments must be brought up for shareholder vote. Shareholders can also vote with their dollars by bidding up the company to a premium valuation or selling it to a level below its intrinsic value.  

Public companies must meet stringent reporting requirements set out by the Securities and Exchange Commission (SEC), including the public disclosure of financial statements and annual 10-k reports discussing the state of the company. Each stock exchange also has specific financial and reporting guidelines that govern whether a stock is allowed to be listed for trading.
Going public does have positive and negative effects, which companies must consider. Here are a few of them:
* Advantages - Strengthens capital base, makes acquisitions easier, diversifies ownership, and increases prestige.
* Disadvantages - Puts pressure on short-term growth, increases costs, imposes more restrictions on management and on trading, forces disclosure to the public, and makes former business owners lose control of decision making.
For some entrepreneurs, taking a company public is the ultimate dream and mark of success (usually because there is a large payout). However, before an IPO can even be discussed, a company must meet requirements laid out by the underwriters. Here are some characteristics that may qualify a company for an IPO:
* High growth prospects
* Innovative product or service
* Competitive in industry
* Able to meet financial audit requirements

What's the difference between ordinary shares and preference shares?
What Does Ordinary Shares Mean?

Any shares that are not preferred shares and do not have any predetermined dividend amounts.  An ordinary share represents equity ownership in a company and entitles the owner to a vote in matters put before shareholders in proportion to their percentage ownership in the company.  

Ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid.  They are also entitled to their share of the residual economic...

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