Three types of business organization:
A. Sole Proprietorship: A firm owned by a single individual.
Advantages
1. Firm is easy to set up.
2. Decision making is simple,owner has total control.
3. Income is taxed only once-as personal income.
Disadvatages
1. Owner has unlimited personal liability for obligations of the firm.
2. Difficulty of raising financial capital for the firm.
B. Partnership:A firm owned and operated by more than one person.
1. Limited liability of ownersfor the obligation of the firm.
2. Access to large blocks of financial capital by selling stocks and bonds.
3. Firm can hire professional management and replace personnel when necessary.
4. Firms has potentially and legal eternal life-ownersmay come and go or die
Advantages
1. Firm is easy to set up.
2. Access to more financial capital then proprietorship.
3. Some specialization is possible; more management skills available.
4. Income is taxed only once.
Disadvantages
1. Disagreement among partners creates decision making problems.
2. Unlimited liability for partners.
3. Legal complications when a partner dies or leaves.
C. Corporation: A firm owned by those who buy shares/stock and whose liability is limited to the amount of their investment.
Advantages
1. Limited liability of ownersfor the obligation of the firm.
2. Access to large blocks of financial capital by selling stocks and bonds.
3. Firm can hire professional management and replace personnel when necessary.
4. Firms has potentially and legal eternal life-ownersmay come and go or die
Disadvantages
1. Double taxation of income once on the profits of the corporation and then on profit received as income.
2. Possibility of conflicting goals of management and owners.
3. Owners have very little say in management decisions.
4. Costly and complicated toestablish and run to meet legal obligations.
Advantages and disadvantages of bonds and shares issuance to a corporation.
Bonds - Advantages:
1. No dilution of control and ownership for existing shareholders.
2. Interest is tax deductible.
3. Cheaper than equity finance.
[Fixed coupon interest to investors, and lower cost is expected in return.]
4. Higher financial leverage, increase earnings per $ invested for shareholders.
Bonds - Disadvantages:
1. Commited cash outflows for interest payment until maturity.
2. The fund is not permanent, redemption takes place at maturity date.
3. The financial risk increases as financial gearing increases.
Shares - Advantages:
1. No commited cash outflows required. No financial burden.
2. Permanent funding.
3. Do not increase the financial gearing.
4. Suitable for raise a large sum of money, through a public issue via the stock exchange.
Shares - Disadvantage:
1. Dilution of ownership and control for existing shareholders.
2. Dividend is not tax deductible. No tax savings.
3. It is more costly than bonds issue.
[Generally, shareholders expects higher returns due to higher risks. Dividend payment is not guaranteed. Shareholders are at the bottom of the credit hierarchy. Capital gain is uncertain.]Explain how flows of founds operate in the economy.Explain:investment bank,saving insitution,pension funds,mutual funds,insurance companies.Explain TVOM and loan amortization.就這最后三個了謝謝你啦！可以重新發(fā)題嗎。追問有字限，我也不習慣這樣。你可以重新發(fā)題，然后@我，不用額外加分了。最好每題分下來發(fā)，不然很亂。你重發(fā)一下，我盡量會回答完。