Fi515 Week 1 Assignment - Fi515 Week 1 Assignment Week 1...

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Week 1 assignments FI515 Mini case A-Why is corporate finance important to all managers? Corporate finance provides managers with the skills to identify and select the corporate strategies and individual projects that add value to the company. It helps them to forecast the funding requirements of their company and the necessary strategies to acquire those funds. B- Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. The three main forms of business organizations are: Sole proprietorship, Partnerships and corporations. The main advantages of a Proprietorship are: it is easily and inexpensively formed, it is subject to few government regulations, and the business pays no corporate income taxes. Its disadvantages are: it is difficult for a proprietorship to obtain large sums of capital, the proprietor has unlimited personal liability for the business debts, and the life of the business is limited to the life of the owner. The major advantage of a partnership is its low cost and ease of formation. The disadvantages are similar to those associated with proprietorships: unlimited liability, limited life of the organization, difficulty of transferring ownership, and difficulty of raising large amounts of capital. The tax treatment of a partnership is similar to that for proprietorships, which is often an advantage. The corporate form of business has three major advantages: unlimited life, easy transferability of ownership interest, and limited liability. While the corporate form offers significant advantages over proprietorships and partnerships, it does have two primary disadvantages: corporate earnings may be subject to double taxation and setting up a corporation and filing the many required state and federal reports is more complex and time-consuming than for a proprietorship or a partnership. In a limited partnership, the limited partners are liable only for the amount of their investment in the partnership; however, the limited partners typically have no control. The limited liability partnership form of organization combines the limited liability advantage of a corporation with the tax advantages of a partnership. Professional corporations provide most of the benefits of incorporation but do not relieve the participants of professional liability. C. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? As a firm grows, it needs more capital. The firm finds out that it’s advantageous to raise funds directly from investors. This is when the firm is ready to sell new financial assets, such as share of stocks, to the public. Agency problems are the conflict of interest between the firm’s owner and the managers.
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Fi515 Week 1 Assignment - Fi515 Week 1 Assignment Week 1...

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