Week 1 Assignment
Mini Case Pg 46

A. Why is corporate finance important to all managers?

Corporate finance provides the skills managers need to: Identify and select corporate strategies and individual projects that add value to their company and forecast funding requirements of their company, and devise strategies for acquiring 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.

There are three main forms of business organizations and forms. Sole Proprietorships are easy and inexpensive to form. They are also subject to very few government regulations and pay no corporate income taxes. However, it is difficult for sole proprietorships to obtain large sums of capital. The personal liability is also unlimited for the business debts. The life span of the business organized as a proprietorship is limited to the life of the individual who started the business. Partnerships also similar to sole proprietorships are easy to form and have a low start up cost. The liability is also unlimited and the life of the organization is limited to the ownership of the partners. However, with partnerships it is difficult to transfer ownership and to raise large amounts of capital. Corporations have unlimited life and they can transfer ownership easier than a partnership. Corporations are subjected to limited liability but may be subject to double taxation. Setting up a corporation is more complex than setting up a partnership or proprietorship.

C. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?

Corporations continue to grow and go public by selling their stock to the public. As the company grows they can get capital from the public and use that money for growth. An