Caso Della Torre
a. Why is corporate finance important to all managers?
Corporate finance deal with financial decisions business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize corporate value while managing the firm's financial risks.
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. |Types of business | | | | |organization |Description |Advantages |Disadvantages | | | | | | |Sole Proprietorship |Form of business organization with a |Easy to establish. |Decisions are not checked by a | | |single owner who has unlimited |Simple decision making process. |group consensus. | | |liability for the firm’s debts and |Profits are only taxed once. |The owner’s entire wealth is | | |other legal obligations. Income flows | |exposed to risk. | | |through to the proprietor (owner) who | |The business may cease to exist | | |pays taxes on it as personal income. | |when the owner dies. | | | | |The raising capital can be | | | | |difficult and relatively | | | | |expensive. | | | | | | |Partnership |Form of business organization involves |Easy to establish. |It can be difficult to achieve | | |two or more owners who both have |Decision making is diversified |consensus decisions. | | |unlimited liability for the debts and |among partners. |Owner’s entire wealth is exposed| | |other legal obligations of the |May survive even if a partner |to risk and there may be a | | |partnership. A partnership’s taxable |leaves or dies. |capital shortfall when a partner| | |income is allocated (as personal |Profits are only taxed once. |dies or leaves for other | | |income) to the partners based on their | |reasons. | | |proportional ownership of the | |Since each partner may bring | | |partnership. | |capital to the firm, capital is | | | | |generally more readily available| | | | |than for a proprietorship, but | | | | |there are still significant | | | | |limitations on the ability to | |...
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