FI515Week1 - W1 Student Homework Template Week One:...

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W1 Student Homework Template Week One: Chapter 1: Questions 1-1 (A-K) and 1-2 Chapter 2: Questions 2-1 and 2-3 Chapter 2: Problems 2-9 and 2-14 Chapter 1 Questions Question Answer 1.1 a. Proprietorship – an unincorporated business owned by one individual. Partnership – when two or more persons associate to conduct a non-corporate business for profit. Corporation – a legal entity created by a state and it is separate and distinct from its owners and managers. b. Limited partnership – certain partners are designated general partners and others limited partners. The limited partners are liable only for the amount of their investment, while the general partners have unlimited liability. Limited liability partnership- all partners enjoy limited liability with regard to the business’s liabilities, with their potential losses limited to their investment in the LLC. Professional corporation – provides a way for groups of professionals to incorporate and thus avoid certain types of unlimited liability, yet still be held responsible for professional liability (doctors, lawyers, and accountants for example). c. Stockholder wealth maximization – the main priority for managers should be stockholder wealth maximization. Since managers are supposed to be working on behalf of the shareholders, they should pursue policies that enhance shareholder value.
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d. Money market – markets for short-term, highly liquid debt securities Capital market – intermediate or long-term debt and corporate stocks. Primary market – corporations raise new capital Secondary market – existing, already outstanding, securities are traded among investors. e. Private markets – transactions are worked out directly between two parties Public markets – standardized contracts are traded on organized exchanges. Derivatives – Claims whose value depends on what happens to the value of some other assets. f. Investment banker - a middleman between businesses and investors. Financial service corporation – offers a wide range of financial services such as brokerage operations, insurance, and commercial banking. Financial intermediary – bands or mutual funds where transfers can be made. g.
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FI515Week1 - W1 Student Homework Template Week One:...

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