a. Why is corporate finance important to all managers?
Corporate finance is important to all managers because it allows a manager to be able to predict the funds the company will need for their upcoming projects and think about ways to organize and acquire 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.
The organizational forms a company might have as it evolves from a start-up to a major corporation are: sole proprietorships, partnerships and corporations. The advantages of a sole proprietorship are that is is easily and inexpensively formed; is subject to few government regulations and it’s income is not subject to corporate taxation (but is taxed as part of the proprietor’s personal income). A partnership has many many of the same advantages and disadvantages as a sole proprietorship but a partnership is more complicated with regards to liability. For example if the partnership goes bankrupt if any partner is unable to meet their pro rata liability then the remaining partners must make good on the unsatisfied claims by drawing on their personal assets. A corporations has three major advantages: unlimited life (a corp. can continue after their original owners are deceased); easy transferability of ownership interest (stock is more easily transferred than proprietorship or partnership interests); and limited liability (losses are limited to the actual funds invested). The disadvantages are that corporate earnings are subject to double taxation and the corporation by prepare a charter, bylaws, and many state and federal reports which are very complex and time-consuming.
c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
Corporations go public and continue to grow by selling