Week One Managerial Finance

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a. Why is corporate finance important to all managers? Corporate finance is important to all managers as it helps to achieve the three goals of the company. These are skilled people at all levels, strong relations with outside groups, and the ability to execute plans. Corporate finance can be used to forecast and fund the strategies of the company.

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. The corporate life cycle includes the proprietorship, partnership, and corporation. The proprietorship is owned just by the one individual. According the reading the three advantages to a proprietorship are that it is easy and inexpensive, subject to few government regulations, and they do not pay corporate taxes (Ehrhardt & Bringham, 2011). The disadvantages to proprietorship are difficult to gain capital, personal liability for business debt, and the business is limited to just the founder life (Ehrhardt & Bringham, 2011). The partnership has two or more people and has the advantages and disadvantages are similar to the proprietorship. One disadvantage is that the partners can lose their assets even if they are not tied to the business unless a limited partnership is done (Ehrhardt & Bringham, 2011). The corporation is a legal entity under a state law that keeps the business separate from the owners. The advantages are the corporation can have unlimited life, transfer ownership easily, and the liability is limited to the assets tied to the business. The disadvantages are the earnings are subject to double taxation and the charter that needs to be set up. This involves writing bylaws, and filing the state and federal reports (Ehrhardt & Bringham, 2011).

c. How do corporations go public and continue to grow? Once the corporation grows it will need to get funding either from banks or initial public offering (IPO). What are agency...
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