Question

In: Finance

Select one business structure and how the use of that business structure would impact the financial...

Select one business structure and how the use of that business structure would impact the financial management of that particular company.

Briefly summarize how this financial management approach would differ in the other business structures.

Solutions

Expert Solution

The business structure selected is "Sole Proprietorship". In this form of business structure, all the business related decisions are taken by the owner/proprietor. All the risks are assumed by the owner. Similarly, all the rewards/benefits accrue to the proprietor. The capital is mostly contributed by the owner. It may be difficult for a proprietor to obtain loans/debt financing from banks and financial institutions because of its unstructured form. The proprietor may borrow funds from friends and relatives to meet business requirements. If the business idea is truely unique, the business owner might be able to procure funds from a venture capitalist who in turn may either demand a share in business or a very high rate of return on his/her investment in the business. The funds generated from day to day business operations are used to meet the working captial requirements. The net profit may be retained by owner at the end of the year or reinvested (in full or partial) to expand the business.

The other forms of business structures include partnership firms and companies. Unlike an unregistered partnership firm, where the capital is mostly contributed by the partners, it is easier for a registered partnership or LLP (limited liability partnership) and business corporation to secure loans from banks and financial institutions in addition to capital contributed by partners/owners. A business corporation, if successful, can raise also huge amount of capital by issuing shares to third parties and transferring a part/portion of ownership to investors. The profits generated by a corporation may be distributed to investors in the form of dividends or retained in the business to finance expansion/growth projects or reduce the proportion of debt (if any) in the capital structure. The financial management may appear to be more structured in case of registered partnerships or LLP and business corporations as compared to a sole proprietorship.  All the business and financial decisions will have to be taken in the best interest of the firm and shareholders (in case of a corporation) and not for personal gains/benefits.


Related Solutions

Select one of the three scenarios and describe how you would use a systematic sample to...
Select one of the three scenarios and describe how you would use a systematic sample to select the sample. Write your answers in complete sentences. 2-4 sentences should suffice. 1) A group of scientists would like to determine if a new drug shrinks spleen tumors in mice. In order to do this, they select 150 mice and measure the size of their spleen tumors. Then they administer the drug. Then, they measure the size of the spleen tumors afterward. 2....
How do financial markets impact our personal lives? And how do they impact business?
How do financial markets impact our personal lives? And how do they impact business?
Explain in a short essay how you would use a Health Impact Assessment to address one...
Explain in a short essay how you would use a Health Impact Assessment to address one social determinant and health issue.
select one manufacturer and one service business that you are familiar with and indicate what would...
select one manufacturer and one service business that you are familiar with and indicate what would be included in the three types of inventory accounts. Use details that are unique to your businesses
Select one manufacturer and one service business that you are familiar with and indicate what would...
Select one manufacturer and one service business that you are familiar with and indicate what would be included in the three types of inventory accounts. Use details that are unique to your businesses. As my example: Manufacturer: Raw Materials Inventory: Work in Process Inventory: Finished Goods Inventory: Service Business: Raw Materials Inventory: Work in Process Inventory: Finished Goods Inventory:
Using one financial ratio discussed, show how you would use it to analyze the financial position...
Using one financial ratio discussed, show how you would use it to analyze the financial position of a health care facility or department. Include current benchmarks in your discussion.
How would you structure a partial transfer of ownership in the business to Cindy and Luke...
How would you structure a partial transfer of ownership in the business to Cindy and Luke to achieve a fair market value of the transfer that is less than Cindy and Luke’s proportionate share of the $10,000,000 value? Are there any penalty concerns associated with the valuation discounts that your proposed transfer takes advantage of, especially if the valuation is found to be inaccurate?
What is the impact of accounting decisions on the financial statements? -What would be the impact...
What is the impact of accounting decisions on the financial statements? -What would be the impact in the income statement and balance sheet?
How will changes in arterial PO2 impact ventilation? Select the one most accurate response. Group of...
How will changes in arterial PO2 impact ventilation? Select the one most accurate response. Group of answer choices Small changes in arterial PO2 will result in fine changes to VE in order to maintain relatively stable arterial PO2. Arterial PO2 will not affect ventilation unless it drops below 60mmHg. O2 cannot cross the blood/brain barrier, thus cannot interact with central chemoreceptors to have an impact on ventilation. Breathing 100% O2 at atmospheric pressure will greatly reduce the urge to breathe.
How can inflation impact financial reports and can that impact financial decisions?
How can inflation impact financial reports and can that impact financial decisions?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT