Fi515

RUNNING HEAD: Home Work Week 1

Week 1 Homework

Keller Graduate School of Management

LINDA MOON

FI515: Managerial Finance

BRUCE VAN APELDOORN

01/09/2011

Mini case pg. 45

Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle Della Torre, a professional tennis player who has just come to the United States from Chile. Della Torre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer.

Della Torre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to explain the U.S. financial system to Della Torre.

a. Why is corporate finance important to all managers?

Corporate finance represents those who are responsible for controlling company assets; however this means they control the finances. Their decision is vital when funding is needed for projects.

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.

There are three main forms of business organization (1) sole proprietorships, (2) partnerships, and (3) corporations. However; there are also several hybrid forms that are gaining popularity. The hybrid forms include: limited partnership, the limited liability partnership, the professional corporation, and the s corporation.

A proprietorship has three main advantages: (1) it is easily and inexpensively formed, (2) it is subject to few government regulations, and (3) the business pays no corporate income taxes. The proprietorship also has three major limitations: (1) a proprietorship finds it difficult to obtain large sums of capital; (2) has unlimited personal...