Profit Margin

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Chapter 1

The Goals and Functions of Financial Management

Discussion Questions

|1-1. |How did the recession of 2007–2009 compare with other recessions since the Great Depression in terms of length? | | | | | |It was the longest | | | | |1-2. |What effect did the recession of 2007–2009 have on government regulation? | | | | | |It was greatly increased. | | | | |1-3. |What advantages does a sole proprietorship offer? What is a major drawback of this type of organization? | | | | | |A sole proprietorship offers the advantage of simplicity of decision making and low organizational and operating costs. | | |A major drawback is that there is unlimited liability to the owner. | | | | |1-4. |What form of partnership allows some of the investors to limit their liability? Explain briefly. | | | | | |A limited partnership allows some of the partners to limit their liability. Under this arrangement, one or more partners| | |are designated general partners and have unlimited liability for the debts of the firm; other partners are designated | | |limited partners and are liable only for their initial contribution. The limited partners are normally prohibited from | | |being active in the management of the firm. | | | | |1-5. |In a corporation, what group has the ultimate responsibility for protecting and managing the stockholders' interests? | | | | | |The board of directors. | | | | |1-6. |What document is necessary to form a corporation? | | | | | |The articles of incorporation. | | |...
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