Publicly Held Corporation

Publicly Held Corporation Stock Exchange Common Stock Business Entity Public Trading Equity Markets
A publicly held corporation is a type of business entity whose shares of common stock are offered to the general public and traded on a national stock exchange.
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Definition

A publicly held corporation, also known as a public corporation, is a type of business organization whose shares of common stock are available for purchase by the general public on a national stock exchange, such as the New York Stock Exchange (NYSE) or NASDAQ. These companies are required to comply with strict regulatory and reporting requirements set forth by the Securities and Exchange Commission (SEC) to provide transparency and protect investors.

Publicly held corporations are characterized by their ability to raise capital by issuing shares to the public, which can help fund expansion, research and development, and other business operations. Ownership of these companies is distributed among numerous shareholders, making it easier for the entity to accumulate substantial capital.

Examples

  1. Apple Inc.: Apple is one of the most well-known publicly held corporations listed on NASDAQ. It sells shares of its common stock to the public, allowing anyone to invest in its business.

  2. Microsoft Corporation: Another major publicly held corporation, Microsoft is listed on the NASDAQ exchange and has multiple classes of stock available for public trading.

  3. Coca-Cola Company: Coca-Cola is listed on the New York Stock Exchange (NYSE) and offers its shares for trading to the general public.

Frequently Asked Questions

Q1: What are the advantages of a publicly held corporation?

A1: The advantages include access to more capital through public markets, increased public awareness, and liquidity for shareholders.

Q2: What are the regulatory requirements for publicly held corporations?

A2: Publicly held corporations must adhere to the SEC’s regulations, including regular financial reporting, corporate governance standards, and disclosure of material events.

Q3: How can one buy shares of a publicly held corporation?

A3: Shares can be purchased through brokerage firms on stock exchanges where the corporation is listed.

Q4: What is the role of the board of directors in a publicly held corporation?

A4: The board of directors governs the corporation, makes major decisions, and oversees management to protect shareholders’ interests.

Q5: Can publicly held corporations become privately held again?

A5: Yes, through a process called “going private,” where private investors buy out public shareholders, thus delisting from public exchanges.

  • Initial Public Offering (IPO): The first sale of stock by a company to the public.
  • Stock Exchange: A marketplace where securities are bought and sold.
  • Shareholder: An individual or entity that owns shares of a corporation.
  • Securities and Exchange Commission (SEC): The regulatory body responsible for overseeing the securities markets in the U.S.
  • Market Capitalization: The total market value of a company’s outstanding shares of stock.

Online References

Suggested Books for Further Studies

  • “The Public Company Handbook: A Corporate Governance and Disclosure Guide for Directors and Executives” by Douglas R. Raymond and William R. Kucera
  • “Public Company Reporter” by Wolters Kluwer Editorial Staff
  • “Investor Relations for the Emerging Company” by Ralph A. Walkling, Jeff J. Marek, and Laura T. Starks

Fundamentals of Publicly Held Corporation: Business Law Basics Quiz

### What primarily distinguishes a publicly held corporation from a privately held corporation? - [x] Its shares are traded on a national stock exchange. - [ ] It has fewer regulatory requirements. - [ ] It does not sell shares to the public. - [ ] It is not subject to SEC regulations. > **Explanation:** A publicly held corporation's shares are traded on a national stock exchange, unlike privately held corporations whose shares are not available to the public. ### What is the primary regulatory body that oversees publicly held corporations in the United States? - [ ] Federal Trade Commission (FTC) - [ ] Internal Revenue Service (IRS) - [x] Securities and Exchange Commission (SEC) - [ ] Federal Reserve > **Explanation:** The Securities and Exchange Commission (SEC) is the primary regulatory body overseeing publicly held corporations in the United States. ### What is an Initial Public Offering (IPO)? - [x] The first sale of a corporation's stock to the public - [ ] The annual financial report of a public corporation - [ ] A quarterly earnings announcement - [ ] A secondary stock offering > **Explanation:** An Initial Public Offering (IPO) is when a corporation offers its stock to the public for the first time. ### Which stock exchange is known for listing technology companies such as Apple and Microsoft? - [ ] New York Stock Exchange (NYSE) - [x] NASDAQ - [ ] London Stock Exchange (LSE) - [ ] Tokyo Stock Exchange (TSE) > **Explanation:** NASDAQ is known for listing many technology companies, including Apple and Microsoft. ### Which of the following is NOT typically a characteristic of a publicly held corporation? - [ ] Shares are traded on a stock exchange. - [ ] Subject to SEC reporting requirements. - [ ] Can raise capital through public markets. - [x] Owned by a small group of private investors. > **Explanation:** A publicly held corporation is characterized by trading shares on the stock exchange and being subject to SEC requirements. It is not usually owned by a small group of private investors. ### Which document must publicly held corporations file quarterly to report their financial performance? - [ ] Form W-2 - [ ] Section 8K - [x] Form 10-Q - [ ] Schedule D > **Explanation:** Publicly held corporations must file Form 10-Q quarterly to report their financial performance. ### How do shareholders make decisions in a publicly held corporation? - [ ] Direct management of operations - [ ] Through managerial meetings - [x] Voting in annual general meetings - [ ] Filing personal financial contributions > **Explanation:** Shareholders make decisions in a publicly held corporation by voting in annual general meetings. ### What is market capitalization? - [ ] The annual revenue of a company - [x] The total market value of a company's outstanding shares - [ ] The book value of a company - [ ] The tax valuation of a company > **Explanation:** Market capitalization is the total market value of a company's outstanding shares of stock. ### Which term refers to the division of one share into multiple shares, depending on the company's stock price performance? - [x] Stock split - [ ] Initial Public Offering (IPO) - [ ] Share buyback - [ ] Dividend payout > **Explanation:** A stock split refers to dividing one share into multiple shares, which usually happens when a company’s stock price has significantly increased. ### What is a common motivation for a private company to become a publicly held corporation? - [ ] Reduce tax obligations - [x] Raise capital by selling shares to the public - [ ] Avoid regulatory scrutiny - [ ] Restrict ownership to a few shareholders > **Explanation:** A common motivation for a private company to become a publicly held corporation is to raise capital by selling shares to the public.

Thank you for engaging in our comprehensive exploration of Publicly Held Corporations and testing your knowledge through our sample quiz questions. Continue to expand your business acumen!

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