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16 Cards in this Set
- Front
- Back
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Proprietorship
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unincorporated business owned by one individual
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Partnership
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unincorporated business owned by two or more persons
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Corporations
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a legal entity created by a state, and it is sperate and distinct from it's owners and managers, having unlimited life, easy transferability of ownership, and limited liability
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S Corp
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taxed as if partnership (typically small business)
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C Corp
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large businesses
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LLC and LLP
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have limited liability like corporations but are taxed like partnerships
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Proprietorships and Partnership A and D
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Advantages: ease of formation, few regulations, no corporate taxes
Disadvantages - difficult to raise capital, unlimited liability, limited life |
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Corporations A and D
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Advantages - unlimited life, easy ownership transfer, easy to raise capital
Disadvantages - double taxation, cost of setup and report filing |
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LLC and LLP A and D
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Advantages - limited liability, investors have votes in interest of company
Disadvantages - difficulty in setting up, difficult to raise capital |
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Goal of a Company
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to maximize the long run value of the firms common stock
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Value of a Company
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any asset is the present value of the stream of cash flows that the asset provides it's owners over time
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Intrinsic Value
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your opinion of stock price if you know company very well
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Market Price
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traded stock price
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Equilibrium
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when market price equals intrinsic value
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Managers vs. Stockholders
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Managers are naturally inclined to act in own best interests, which are not always the same as interest of stockholders
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Stockholders vs. Bondholders
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- Stockholders receive a bigger benefit in big company wins
- Bondholders have "downside tail risk" - Bond covenants can help protect bondholders |
