Second Lecture Flashcards
Sole Proprietorship
Single individual (person) owns the business – simple decision making and unlimited personal liability
Partnership
Two or more owners - Possible to pool more money - share decision-making and operational responsibilities - shared losses.
LLP
One or more individuals are general partners who have unlimited liability for the debts of the firm - all others are limited partners only liable for their contribution and usually have no authority over day-to-day operations
Corporation
A legal entity unto itself - owned by shareholders - has a continual life - owners have limited liability
S Corporation
Income is taxed as direct income to stockholders
LLC
Limited liability company – technically not a corporation
Agency
The relationship between owners and managers of the firm
Fiduciary
Look for the best interest of the company
Corporate governance
How the corporation is managed – legal and ethical responsibilities – shareholder rights
Sarbannes-oxley act
Direct consequence of poor corporate governance and fraud
The job of corporate managers
Maximize shareholder wealth by achieving the highest value possible for the firm
Financial Markets
- A place that matches those who need capital with those with funds to invest
- Participants can be anybody and any governmental jurisdiction
Role of the Market
- Allocation of capital through ipo and secondary market
* Markets price risk
