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Chapter 1 Capital budgeting, What long-term investments or projects should the business take on? Capital structure, How should we pay for our assets?, Debt or equity?. Working capital management, How do we manage the day-to-day finances of the firm? Forms of Business Organization Sole Proprietorship, Easiest to start, Least regulated, Single owner keeps all the profits, Taxed once as personal income, Disadvantages, Limited to life of owner, Equity capital limited to ownerˇ¦s personal wealth, Unlimited liability, Difficult to sell ownership interest. Partnership, Two or more owners, More capital available, Relatively easy to start, Income taxed once as personal income, Unlimited liability, Partnership dissolves when one partner dies or wishes to sell, Difficult to transfer ownership Corporation, Limited liability, Unlimited life, Separation of ownership and management, Transfer of ownership is easy, Easier to raise capital, Disadvantages, Separation of ownership and management, Double taxation (income taxed at the corporate rate and then dividends taxed at personal rate) What should be the goal of a corporation?,Max profit? Min costs? Max market share?, Max the current value of the companyˇ¦s stock? The Agency Problem, Principal hires an agent to represent their interest, Stockholders (principals) hire managers (agents) to run the company Agency problem, Conflict of interest between principal and agent, Management goals and agency costs Chapter 2 Nonrecurring and nonoperating items, - Discontd operations , Extraordinary gains and losses, Cumulative effect of a change in acct prin.
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