Financial Management Theory and Practice Essay

1440 Words Jul 24th, 2012 6 Pages
Question a. Why is corporate finance important to all managers?

Corporate Finance is important to all managers because it gives them the skills necessary to identify and select the corporate strategies that could add value to the company.

Question 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.

|Organizational Form |Advantages |Disadvantages |
|Sole Proprietorship |It is easily and inexpensively formed. |Difficult to obtain the necessary capital |
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|Corporation |A corporation has unlimited life as it can |Corporate earnings may be subject to double |
| |continue after its original owners and managers|taxation. |
| |are deceased. |Setting up a corporation involves many complex |
| |Easy transferability of ownership interest as |and time consuming steps like preparing a |
| |these interests are divided into shares of |charter, writing a set of bylaws and filing the|
| |stock. |many required state and federal reports. |
| |Losses are limited to the actual finds | |
| |invested. | |

Question c. How do corporations go public and continue to grow? What are agency problems? What is

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