Mini Case (p. 45)
a. Why is corporate finance important to all managers?
It is important because successful companies must not only be able to obtain high valued product and satisfy customers; they must be able to generate enough cash to compensate investors who provide the capital. Corporate finance helps to do this by giving managers tools to evaluate any proposal, such as marketing, production, and strategy and be able to implement only the projects that add value for the investors.

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.
Companies can have three organizational forms which are proprietorships, partnerships and corporations.
Companies usually start as a proprietorship which is owned by one individual. It is generally easy and inexpensive to startup; it has fewer regulations than other organizational forms; and the income is not subjected to corporate taxation but is taxed as part of the proprietor’s personal income. However, the disadvantages of a proprietorship are that it may be difficult for a sole owner to generate needed capital for growth; personal liabilities are unlimited for the business debt, which can have implications on the owner’s personal assets such as property; and the life of the company is limited to the life of the founder. A general partnership is the same as a sole proprietorship in that it is a business that conducts non-corporate business; however, it has two or more people. The advantages and disadvantages are generally the same as a sole proprietorship; however, partners are responsible for their remaining partners’ liabilities and may have to make up the difference with their personal assets. One way to combat this is to establish a limited partnership where the limited partner can only lose what