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Study Guide Test 1.docx - Study Guide Test #1 Chapter 1: 1....

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Study Guide Test #1Chapter 1:1. Productive Assets:Long-term asset. Can be tangible or intangible assets.Tangible Assets: Equipment, machinery, manufacturing facility.Intangible Assets: Patents, trademarks, technical expertise, intellectual capital.2. Three Fundamental Decision in Financial Management:Capital Budgeting Decisions:identify the productive assets the firm should buy.Financing Decisions:determine how the firm should finance or pay for assets.Working Capital Management Decisions:determine how day-to-day finance mattersshould be managed so that the firm can pay its bills, and how surplus cash should beinvested.3. Forms of Business Organization:Sole Proprietorship:owned by a single person who is financially responsible for theactions and obligations of the business.oAdvantagesEasiest to create and controlEasiest to dissolveRight to all profitsoDisadvantagesOwner’s personal assets at risk due to unlimited liability for firmobligationsEquity only from owner or business profitBusiness income taxes as personal incomeDifficult to transfer ownershipPartnership:owned by more than one person; one or more of them is financiallyresponsible for the actions and obligations of the business.oAdvantagesLimited protection of owner’s personal assetsOwner’s limited liability for firm obligationsMore sources of equityMore sources of expertiseoDisadvantagesShared controlShared profit harder to dissolveCorporation:owned by more than one person; none of them are financially responsiblefor the actions and obligations of the business. The corporation is responsible for itsobligations and actions.oAdvantagesProtects personal assetsNo shareholder liability for businessEasiest to change ownershipGreatest access to sources of fundsoDisadvantagesMost difficult and expensive to establishDilutes individual control over the firmOverall higher taxes on income for shareholders
LLP and LLC:Hybrid forms of business organization. Both combine some of thelimited liability characteristics of a corporation with the tax advantage of a partnership.4. C-Corporation, S-Corporation, B-Corporation:C-Corporation: is a business term that is used to distinguish this type of entity fromothers, as its profits are taxed separately from its owners under subchapter C of the IRScode.S-Corporation: are ordinary business corporations that elect to pass corporate income,losses, deductions and credits through to their shareholders for federal tax purposes. Theterm “S corporation” means a small business corporation which has made that electionunder the IRS code.B-Corporation: are businesses that meet the highest standard of verified social andenvironmental performance, public transparency and legal accountability to balanceprofit and purpose. They form a community of leaders and drive a global movement ofpeople using business as a force for good.5. The Goal of The Firm:Maximize the value of the firm’s stock.

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Term
Fall
Professor
Olander
Tags
Balance Sheet, Corporation, Tangible Assets

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