Question: Earl Kent, your uncle, is an inventor who has decided to incorporate. Uncle Earl knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question, "I'm filling out a state incorporation application. Can you tell me the difference among the following terms:

(1) authorized stock,

(2) issued stock,

(3) outstanding stock, and

(4) preferred stock?"

Instructions: In a brief note, differentiate for Uncle Earl the four different stock terms. Write the letter to be friendly, yet professional.