Ch1 overview of finance basics

Ch1 overview of - BA 3341 Business Finance Nataliya Polkovnichenko Senior Lecturer Class Notes Set 1 Brief Overview of Finance Basics 1 Outline

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1 Class Notes: Set 1 Class Notes: Set 1 Brief Overview of Finance Basics Brief Overview of Finance Basics BA 3341 Business Finance Nataliya Polkovnichenko, Senior Lecturer
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2 Outline Outline Forms of Business Organizations The Finance Model of the Firm The Role of the Financial Manager Goal of the Corporation Agency Problems Financial Markets and the Corporation
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3 Types of Business Organizations Types of Business Organizations In terms of organization, businesses falls into the following four categories: Sole Proprietorships Partnerships Corporations Hybrid forms (of the above basic 3 types) They differ in their ownership, taxation form and the liability limitation.
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4 Sole Proprietorships Sole Proprietorships Manager is the sole owner ; bears all the costs and keeps all the profits after taxes Personal liability for the business activity is unlimited Firm profit is taxed only once
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5 Partnerships Partnerships Several entrepreneurs come together to set up a business, by pooling money and expertise A partnership agreement sets out how management decisions are taken, profits are shared etc. Unlimited personal liability Firm profit is taxed only once
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6 Corporation Corporation A legal entity separate from its owners (shareholders) Limited liability for the business activity from its owners Firm profit is double taxed
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7 Corporate Profit= $1 Corporate Tax=$0.35 Dividends=$0.65 Double Taxation Of Corporate Profit Corporation Corporation Owners Government 35% Personal Income Tax=$0.16 25%
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8 Corporate Structure Corporate Structure Unlimited liability Personal tax on profits Corporations Limited liability Corporate tax on profits + Personal tax on dividends Sole Proprietorships Partnerships
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Hybrid forms Hybrid forms Combine the features of the above 3 basic types. Some examples are: Limited Partnership (LP): An LP has both limited liability partners and at least, one unlimited liability partner. Limited Liability Partnership (LLP): All partners have limited liability, but partners are taxed as partners, avoiding double taxation. Professional Corporation
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This note was uploaded on 09/15/2008 for the course BA 3341 taught by Professor Polkovnichenko during the Spring '08 term at University of Texas at Dallas, Richardson.

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Ch1 overview of - BA 3341 Business Finance Nataliya Polkovnichenko Senior Lecturer Class Notes Set 1 Brief Overview of Finance Basics 1 Outline

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