Post by fastwalker on Nov 7, 2004 19:36:03 GMT -5
;D
The marketplace 101
Even if you have never taken Economics 101, and don’t completely understand the Wall Street Journal’s business pages, you can still find enlightenment in the world of high finance. By understanding the correlation between the price of a stock on the stock market and the actual "health" of a business.
It’s not difficult to understand, IPO (Initial Public Offering) raises money for a company, and that shareholders then have some sort of say-so in managing the business, but after the stock is owned by someone else, why should its price on the stock market be high or low have any bearing on whether or not the company is profitable and pays its bills?
In my Business class from college, we used a model based on the fictional Widgets, in the model, we developed a company ..“Widget Co, “ and brought the product ..Widgets from cradle to grave. We also used this model to advance possible scenarios on how the company would fair, given certain variables… even to have the Widget company declare bankruptcy, when their stock went in the toilet. The point being, we live in a world of reality…at least some of us do, and to explore the potential ups and downs, without losing our shirts….we need to construct and abuse models, to “live out” the possibilities of where our company may go.
Within the parameters of our Widget Company model, we dealt with many aspects of the daily operational process. We also dealt with “growing” of our company up to and even including a theoretical “reporting” on the boards. The complexities of the various scenarios we used to “test” our company, were too many to list here, matter of fact, I had I saved my notes from college, I might have been able to fill several dry and boring books on business. But what I do remember, which isn’t a lot, along with what I deal with in Business on a daily basis may provide some insight and hopefully useful. Not that it will be a “business plan” specifically, but rather a general broad answer kind of thing, to get you on the right track.
As I stated, we, meaning my specific focus group, we developed, as many others did within the class, various scenarios to “flesh out” our Company which we called appropriately enough, the Widget Co.. We even ran scenarios on taking our Wicget Company “reporting” on the stock market, to explore and fully understand the ramifications of going public and how stocks and the stock markets work.
Now bear with me on this, we need to dive into first, the history of what has come to be known as the corporation, and or the limited liability company (LLC). For these answers and others that will follow, I used notes, personal observations from my business and the internet to ensure the accuracy of my statements….getting old here and forgetful.
Corporations in one form or another have been around ever since one guy convinced a few others to pool their resources for mutual benefit. The first corporate charters were created in Britain as early as the sixteenth century, but these were generally Crown monopolies that resembled what we might think of today as a public corporation owned by the government, like the United States Postal Service.
Privately owned corporations came into being gradually during the early 19th century in the United States, United Kingdom and western Europe as the governments of those countries started allowing anyone to create corporations as a routine matter.
The legal status of a corporation derives from three arcane but vital principles: (1) limited liability, (2) transferability of shares, and (3) virtual personhood. Limited liability means that a person who invests in a corporation can never lose more money than he puts in, or to put it another way, investors aren't on the hook for the corporation's obligations.
The English courts summed up the principle of limited liability nicely: Si quid universitati debetur, singulis non debetur, nec quod debet universitas, singuli debent. (If something is owed to the group, it is not owed to the individuals, and the individuals do not owe what the group owes.) Because the company is a separate, autonomous entity, even if it goes belly up, none of the investor's unrelated assets are harmed (unlike a partnership, for instance, where the general partners' other assets might be at risk in case of a lawsuit). Limited liability may sound snarky, but it's the key to getting people to invest in a possibly risky venture.
Transferability of shares means that an investor's stake in a corporation may be freely transferred to another person by sale or donation--typically you don't need anyone's permission nor does the firm need to be reorganized, as is often the case when the principals in a partnership change. Transferability may be subject to limitation in certain instances. For example, laws in some countries, like France and Belgium, place some restrictions on the sale of shares of privately held corporations, and in the U.S. you may be limited in how soon you can sell stock conveyed to you under a stock option plan. As a general proposition, though, transferability makes the stock market possible.
more...
The marketplace 101
Even if you have never taken Economics 101, and don’t completely understand the Wall Street Journal’s business pages, you can still find enlightenment in the world of high finance. By understanding the correlation between the price of a stock on the stock market and the actual "health" of a business.
It’s not difficult to understand, IPO (Initial Public Offering) raises money for a company, and that shareholders then have some sort of say-so in managing the business, but after the stock is owned by someone else, why should its price on the stock market be high or low have any bearing on whether or not the company is profitable and pays its bills?
In my Business class from college, we used a model based on the fictional Widgets, in the model, we developed a company ..“Widget Co, “ and brought the product ..Widgets from cradle to grave. We also used this model to advance possible scenarios on how the company would fair, given certain variables… even to have the Widget company declare bankruptcy, when their stock went in the toilet. The point being, we live in a world of reality…at least some of us do, and to explore the potential ups and downs, without losing our shirts….we need to construct and abuse models, to “live out” the possibilities of where our company may go.
Within the parameters of our Widget Company model, we dealt with many aspects of the daily operational process. We also dealt with “growing” of our company up to and even including a theoretical “reporting” on the boards. The complexities of the various scenarios we used to “test” our company, were too many to list here, matter of fact, I had I saved my notes from college, I might have been able to fill several dry and boring books on business. But what I do remember, which isn’t a lot, along with what I deal with in Business on a daily basis may provide some insight and hopefully useful. Not that it will be a “business plan” specifically, but rather a general broad answer kind of thing, to get you on the right track.
As I stated, we, meaning my specific focus group, we developed, as many others did within the class, various scenarios to “flesh out” our Company which we called appropriately enough, the Widget Co.. We even ran scenarios on taking our Wicget Company “reporting” on the stock market, to explore and fully understand the ramifications of going public and how stocks and the stock markets work.
Now bear with me on this, we need to dive into first, the history of what has come to be known as the corporation, and or the limited liability company (LLC). For these answers and others that will follow, I used notes, personal observations from my business and the internet to ensure the accuracy of my statements….getting old here and forgetful.
Corporations in one form or another have been around ever since one guy convinced a few others to pool their resources for mutual benefit. The first corporate charters were created in Britain as early as the sixteenth century, but these were generally Crown monopolies that resembled what we might think of today as a public corporation owned by the government, like the United States Postal Service.
Privately owned corporations came into being gradually during the early 19th century in the United States, United Kingdom and western Europe as the governments of those countries started allowing anyone to create corporations as a routine matter.
The legal status of a corporation derives from three arcane but vital principles: (1) limited liability, (2) transferability of shares, and (3) virtual personhood. Limited liability means that a person who invests in a corporation can never lose more money than he puts in, or to put it another way, investors aren't on the hook for the corporation's obligations.
The English courts summed up the principle of limited liability nicely: Si quid universitati debetur, singulis non debetur, nec quod debet universitas, singuli debent. (If something is owed to the group, it is not owed to the individuals, and the individuals do not owe what the group owes.) Because the company is a separate, autonomous entity, even if it goes belly up, none of the investor's unrelated assets are harmed (unlike a partnership, for instance, where the general partners' other assets might be at risk in case of a lawsuit). Limited liability may sound snarky, but it's the key to getting people to invest in a possibly risky venture.
Transferability of shares means that an investor's stake in a corporation may be freely transferred to another person by sale or donation--typically you don't need anyone's permission nor does the firm need to be reorganized, as is often the case when the principals in a partnership change. Transferability may be subject to limitation in certain instances. For example, laws in some countries, like France and Belgium, place some restrictions on the sale of shares of privately held corporations, and in the U.S. you may be limited in how soon you can sell stock conveyed to you under a stock option plan. As a general proposition, though, transferability makes the stock market possible.
more...