Nguyen Khanh Son-Chapter 1-10-Finance-2003 - Name:Nguyen...

Name:Nguyen Khanh Son
Batch 2, Troy university
Chapter 1
1.1
When I bought a share of stock, I expect that that company will maximize its value in the
long term through operations and dividend paid .If I buy a overstated share of stock
about its profits in short term, its value will be lowered in the future years. If that
company operates well, I will certain to gain profit.
1.7
The compensation should depend on how well the firm performs. Performance of
company can be measured through its operations and how to maximize its value in
market. It is difficult to measure performance because we only know actual value
through reported profits, internet and newspapers, stock’s intrinsic value are estimate.
The stock’s intrinsic value would be better because we can know exactly how that
company is operating and know what companies’ stock we should invest.

1.8
There are four business organizations:
Advantages
Proprietorships: have three important
advantages: They are easily and
inexpensively formed. They are subject
to few government regulations and they
are subject to lower income taxes than
are cooperation.
Disadvantages
Proprietor have unlimited personal
liability for the business’s debts, so they
can lose more than the amount of
money they invested in the company.
The life of the business is limited to the
life of the individual who created it and
to bring in new equity. Proprietorship
has difficulty obtaining large sums of
capital.
Partnership: can establish relatively
easily and inexpensively. The firm can
avoid the corporate income tax.
Corporation:
All of the partners are generally
subjects to unlimited personal liability.
Unlimited liability makes it difficult for
partnerships to raise large amounts of
capital
The corporation can be easier to raise
capital necessary to operate large
businesses. It is easier to transfer
shares of stock in a corporation than
one’s interest in an unincorporated
business.
Corporation have unlimited lives and
can lose all its money.
Both LLCs and LLps are taxed like
partnerships and have full control of the
business, raise capital to support
growth.

LLCs and LLPs have limited liability like
corporation.

Chapter 2
2.2
There are three different ways in which capital can be transferred from suppliers of
capital to those who are demanding capital
• Direct transfers: It occurs when a business sells it’s or bonds directly to savers
without any tye of financial institution. This procedure is used mainly by small
firms to raised little capital
• Indirect transfers through investment Bankers: Transfers may also go through an
investment bank to underwrite the issue of securities. If there is a risk, the