Key Terms
Core feature
Separate legal entity from owners and managers. That separation is why shareholders only lose what they invested.
Both
Designed to produce accurate, unbiased financial reports. Key differences: inventory accounting, subsidiary consolidatio
Articles of Incorporation (also
Corporate charter):
Liquidity
Ability to convert an asset to cash quickly at fair value. Corporate stock is more liquid than a partnership interest or
Stakeholder
Any person or group with interest in a company's outcomes
Shareholder (stockholder)
Person, company, or organization that owns stock in a company.
Board of Directors (BOD)
Highest-level oversight body. Sets strategy, provides direction, supervises operations.
Mid-level managers
Handle day-to-day operations across departments.
Management functions
Set objectives, organize operations, hire and lead employees, oversee performance against goals.
Subscriber
Initial shareholder listed in the memorandum of association at time of incorporation. Name stays in public register even
Internal director
Involved in daily operations; represents shareholders, officers, and employees.
External director
Represents outside interests; independent of daily operations.
Corporate governance
System of rules and processes directing and controlling a firm
Audit committee (AC)
Subcommittee of the board; handles financial oversight responsibilities.
Independent board member
No material interest in the company beyond their directorship; compensated only for board service; has own information s