Finance Ch1

Created by: Nyle Patel
Created on: 04-05-17 14:35

How to solve problems with raising large amounts of cash?

Limited liability, Perpetual life of enterprise, Easy transfer of ownership

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What are the 5 properties of a sole proprietorship?

oCheapest business to form, few regulations, oTaxed once, profits taxed as personal income, o Unlimited liability, oLife of business is limited by life of sole proprietor, o Money raised by equity limited by sole proprietor’s personal wealth

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What are the properties of partnerships?

1)inexpensive and easy. 2) Gen has unlimited, limited limited. 3)diff to transfer ownership. 4) diff to raise large amounts of cash 5) income taxed as personal. 6)management control with general partners

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Advantages of Corporations

Limited Liability, Perpetual life of enterprise, easy to transfer ownership

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Disadvantages of Corporations

Double taxation. On profits (firm) and on income (for shareholders)

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What is the goal of financial management

maximise current value per share of existing stock OR maximise current value of existing owners’ equity

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What is the Agency Problem and why does it exist

Conflict of interest between principal and agent. Goals aren’t always the same, management want to increase growth and size

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How to manage the management so they act in interest of stockholders

Compensation (stock options) OR Risk of Dismissal

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Other cards in this set

Card 2

Front

What are the 5 properties of a sole proprietorship?

Back

Card 3

Front

What are the properties of partnerships?

Back

Card 4

Front

Advantages of Corporations

Back

Card 5

Front

Disadvantages of Corporations

Back

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Finance Ch1