BFIN620_PPT_CH1-2_sp09-1

BFIN620_PPT_CH1-2_sp09-1 - 1 1Introduction to...

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Unformatted text preview: 1- 1Introduction to FinanceIntroduction to FinanceChapters 1 and 2Brealey-Myers-Marcus5thEditionBusiness Finance 6201- 2Topics CoveredScope of FinanceOrganizing a BusinessForms of business organizationPersonal and tax liabilitiesThe Role of The Financial ManagerFinancial MarketsCorporate Goals and IncentivesValue maximizationAgency issues and their resolution1- 3Scope of FinanceFinance is divided into 3 broad areas:Markets and institutionsInvestmentsFinancial managementEvery business faces 3 critical decisions:Which investment projects to supportHow to finance the projects supportedTo what extent to share earnings of the business with the owners of the businessThis course is about the firm’s investment decision1- 4Types of Business OrganizationsSole ProprietorshipsSchedule C proprietorsPartnershipsGeneral and limitedCorporationsGeneral (“C”) and Sub-Chapter S (“S”)Private (“closely held”) and publicHybrid OrganizationsLimited Liability Partnerships (LLP)Limited Liability Companies (LLC)1- 5Sole Proprietorship Partnership Public Corporation Who owns the business? The Manager Partners Shareholders Separation of ownership and management? No No Usually Liability for the actions of the business? Unlimited Unlimited (exceptions) Limited Owners and the business taxed separately? No No Yes Basic Business FormsDifferentiating Characteristics1- 6Sole ProprietorshipsSingle OwnerOwner manages the business (active role)May have employeesLiabilityProperty contributed to the business remains the property of the sole proprietorSole proprietor is personally liable for all debts of the businessTaxationBusiness is not a separate entity for tax purposesNet income of the proprietorship “passes through” to the return of the proprietor (Schedule C)1- 7...
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BFIN620_PPT_CH1-2_sp09-1 - 1 1Introduction to...

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