Mini Case 1
Corporate finance effects every decision maker in a corporation- from big to small, whether they're making high-level decisions on acquisitions or investments, or choosing vendors. Managers often have to make and explain those decisions to the people who report to them. Understanding corporate finance gives managers the information they need to inform and motivate others.
There are three main forms of business organization are: sole proprietorships, partnerships, and corporations. They may start as a sole proprietorship or partnership and evolve into corporations as they grow. The proprietorship has three important advantages: it’s easily and inexpensively formed, it’s subject to few government regulations, and the business pays no corporate income taxes. The proprietorship also has three important limitations: it’s difficult for a proprietorship to obtain large sums of capital, the proprietor has unlimited personal liability for the business’s debts, and the life of a business organized as a proprietorship is limited to the life of the individual who created it.The major advantage of a partnership is its low cost and ease of formation. The disadvantages are similar to those associated with proprietorships: unlimited liability, limited life of the organization, difficulty of transferring ownership, and difficulty of raising large amounts of capital. The tax treatment of a partnership is similar to that for proprietorships, which is often an advantage.The corporate form of business has three major advantages: unlimited life, easy transfer of ownership interest, and limited liability. While the corporate form offers significant advantages over proprietorships and partnerships, it does have two primary disadvantages: corporate earnings may be subject to double taxation and there are many required state and federal reports that have to be