TAILIEUCHUNG - Financial Management - Chapter 1

Sole Proprietorship A business owned by a single individual. Owner maintains title to the firm’s assets. Owner has unlimited liability. 2) Partnership Similar to a sole proprietorship, except that there are two or more owners. General Partnership All partners have unlimited liability. 2b) Limited Partnership Consists of one or more general partners, who have unlimited liability, and One or more limited partners (investors) whose liability is limited to the amount of their investment in the business. Corporation A business entity that legally functions separate and apart from its owners. Owners’ liability is limited to the amount of their investment in the firm. Owners hold common stock certificates, and ownership. | Ch. 1 - An Introduction to Financial Management 2002, Prentice Hall, Inc. Goal of the Firm 1) Profit Maximization? this goal ignores: a) TIMING of Returns (Time Value of Money - Ch. 5) b) UNCERTAINTY of Returns (Risk - Ch. 6) Goal of the Firm 2) Shareholder Wealth Maximization? this is the same as: a) Maximizing Firm Value b) Maximizing Stock Price Legal Forms of Business 1) Sole Proprietorship A business owned by a single individual. Owner maintains title to the firm’s assets. Owner has unlimited liability. 2) Partnership Similar to a sole proprietorship, except that there are two or more owners. 2a) General Partnership All partners have unlimited liability. 2b) Limited Partnership Consists of one or more general partners, who have unlimited liability, and One or more limited partners (investors) whose liability is limited to the amount of their investment in the business. Legal Forms of Business 3) Corporation A business entity that legally functions separate and apart from its owners. Owners’ liability is limited to the amount of their investment in the firm. Owners hold common stock certificates, and ownership can be transferred by selling the certificates. Legal Forms of Business The Corporation and Financial Markets The Corporation and Financial Markets Corporation The Corporation and Financial Markets Corporation Investors The Corporation and Financial Markets Government Corporation Investors The Corporation and Financial Markets cash Government Corporation Investors The Corporation and Financial Markets cash Government securities Corporation Investors The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets The Corporation and Financial Markets Government cash securities Corporation Investors Secondary markets The Corporation and Financial Markets cash Investors Secondary markets Government securities .

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