Why Corporate Finance Is Important
a. Why is corporate finance important to all managers?
Corporate finance is important to all mangers because it lets them know the company’s financial situation before any decisions can be made within the organization. It helps managers develop strategic financial issues associated with achieving goals. Having a solid understanding of corporate finance helps mangers find ways to raise and manage its capital, which type of investments the firm should make, if profits are earned, how these profits should be allocated to shareholders in the form of dividends and lastly if any other type of firms should be acquired or merged with. Knowing these key points about corporate finance will help the overall organization.
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 organization forms a company as it evolves from a start-up to a major corporation are a sole proprietorship, partnership and a corporation. A sole proprietorship is a business owned by one individual. A partnership exists when two or more individuals form a business together. It’s common for each partner to have the same amount of responsibility. A corporation is a legal entity that has been incorporated through a legislative or registration process through the state it resides in.
Each type of business has its advantages and disadvantages.
The advantages of a proprietorship are: * They are easy and inexpensive to form * They are subject to some government regulations * There is no corporate taxation
The disadvantages of a proprietorship are: * It can be very difficult to obtain the needed capital to start-up & to grow the business * Life of the business is based on the founder. If the founders were to die or get sick, chances are the business would suffer or not exist. * There is unlimited personal liability for the proprietorship
Corporate finance is important to all mangers because it lets them know the company’s financial situation before any decisions can be made within the organization. It helps managers develop strategic financial issues associated with achieving goals. Having a solid understanding of corporate finance helps mangers find ways to raise and manage its capital, which type of investments the firm should make, if profits are earned, how these profits should be allocated to shareholders in the form of dividends and lastly if any other type of firms should be acquired or merged with. Knowing these key points about corporate finance will help the overall organization.
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 organization forms a company as it evolves from a start-up to a major corporation are a sole proprietorship, partnership and a corporation. A sole proprietorship is a business owned by one individual. A partnership exists when two or more individuals form a business together. It’s common for each partner to have the same amount of responsibility. A corporation is a legal entity that has been incorporated through a legislative or registration process through the state it resides in.
Each type of business has its advantages and disadvantages.
The advantages of a proprietorship are: * They are easy and inexpensive to form * They are subject to some government regulations * There is no corporate taxation
The disadvantages of a proprietorship are: * It can be very difficult to obtain the needed capital to start-up & to grow the business * Life of the business is based on the founder. If the founders were to die or get sick, chances are the business would suffer or not exist. * There is unlimited personal liability for the proprietorship