Mini Case

a) Why is corporate finance important to all managers?

(1) Corporate finance is important to all managers because it effects decisions being made daily by the company. It allows those to make effective decision with logical financing. It allows those to identify and select the appropriate strategy that will add value to a firm while coming up with strategies to acquire those funds to do so with.

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.

(1) One organizational form of a company is a proprietorship, which is an unincorporated business owned by one individual. Advantages of a proprietorship are: 1) it is easy and inexpensive to form; 2) subject to few government regulations; and 3) its income is not subject to corporate taxation but it is, however, taxed as part of the proprietor’s personal income. Its’ disadvantages are: 1) difficult to obtain the needed capital to grow; 2) unlimited personal liability for the businesses debts, resulting in losses that exceed invested monies; ad 3) life of the proprietorship is limited to the life of the founder.

(2) A second organizational form of a company is a partnership which exists whenever two or more persons or entities associate to conduct a non-corporate business for profit. The advantages AND disadvantages of a partnership are along the same lines of a proprietorship.

(3) A third organizational form of a company is a limited partnership whereby certain partners are designated as “general” partners and others “limited” partners. Limited partners' liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with tax advantages of a partnership.

(4) Finally, there are three...