Chapter01 - Outline Chapter 1. Introduction to Corporate...

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Outline Chapter 1. Introduction to Corporate Finance Corporate Finance and the Financial Manager Forms of Business Organization The Goal of Financial Management The Agency Problem and Control of the Corporation Financial Markets and the Corporation Summary and Conclusions
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L01-2 Finance The Four Broad Areas of Finance Corporate Finance Investments Financial Institutions International Finance
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L01-3 Corporate Finance What is Corporate Finance? Suppose you want to start your own business. Then, you should be able to answer the following three questions: 1. What long-term Investments should you take on ? Lines of Business, Buildings, Equipments 2. Where will you get the long-term financing to pay for your investments ? Other owners, Borrow 3. How will you manage your everyday financial activities ? Collection, Payment, Inventory Corporate finance is the study to answer these three questions.
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L01-4 Forms of Business Organization In what form would you set up your business? There are basically three different forms of business organizations. 1. Sole Proprietorship 2. Partnership 3. Corporation 1. Sole Proprietorship : A business owned by one person Advantages Easiest to start. Least regulated. Single owner keeps all the profits. Taxed once as personal income. Disadvantages Limited to the life of owner. Equity capital limited to the owner’s personal wealth. Unlimited liability. Difficult to sell ownership interest.
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L01-5 Forms of Business Organization 2. Partnership : Similar to a proprietorship except two or more owners Advantages Two or more owners. More capital available. Relatively easy to start. Income taxed once as personal income. Disadvantages Unlimited liability General partnership Limited partnership. Partnership dissolves when one partner dies or wishes to sell. Difficult to transfer ownership.
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Business Organization (continued) 3. Corporation : An entity formed by many different owners but acts as a legal Person ’ separate and distinct from its owners, and has many of the rights, duties, and privileges of an actual person. In order to form a corporation one must have the followings: The article of incorporation (or a charter ) that contain a number of things, including the corporation’s name, its intended life (which can be forever), its business purpose, and the number of shares that can be issued. The bylaws that describe how the corporation regulates its existence. For example, the bylaws describe how directors are elected. The bylaws may be amended or extended from time to time by the stockholders. Advantages Separation of ownership and management. Transfer of ownership is easy. Unlimited life. Easier to raise capital (corporate name) Limited liability. Disadvantages
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This note was uploaded on 04/13/2010 for the course TECHNOLOGY 032913 taught by Professor Hong during the Spring '08 term at 서울대학교.

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Chapter01 - Outline Chapter 1. Introduction to Corporate...

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