BUS3062

Assignment 1, Week 1

1. Define the terms finance and financial management, and identify the major sub-areas of finance. Finance is the way in which money is used and handled; especially, the way in which large amounts of money are used and handled by governments and companies (Merriam-Webster, 2014). Financial Management is the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization (Businessdictionary, 2014). The major sub-areas of finance are: investments—involves methods and techniques for making decisions about what kinds of securities to own; financial management—deals with a firm’s decisions in acquiring and using the cash that is received from investors or from retained earnings; financial institutions and markets—the two entities work in different ways to facilitate capital flows between investors and companies; International finance—involves investors, companies, business operations, and capital markets that may be located in different companies(Cornett, Adair, & Nofsinger, 2014,). 2. What are the three basic forms of business ownership? What are the advantages and disadvantages to each" (Cornett, Adair, & Nofsinger, 2014, p. 21)? Partnership is an organizational form that has multiple individual owners. Each partner can own a different percentage of the firm. Advantages: Business profits are split among the partners according to a prearranged agreement. Received profits are added to each partner’s personal income and taxed at personal income tax rates. Banks are more willing to lend to partnerships. Disadvantages: Partners jointly share in unlimited personal liability for the debts of the firm and all are obligated for contracts agreed to by any of the partners. Corporations are a legally independent entity entirely separate from its owners. Corporations hold many