Question

In: Accounting

What are the four primary disadvantages to the sole proprietorship and partnership forms of business Page 19organization?

2. Sole Proprietorships and Partnerships. What are the four primary disadvantages to the sole proprietorship and partnership forms of business Page 19organization? What benefits are there to these types of business organization as opposed to the corporate form?

3. Corporations. What is the primary disadvantage of the corporate form of organization? Name at least two of the advantages of corporate organization.

4. Corporate Finance Organization. In a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance?

5.  Goal of Financial Management.What goal should always motivate the actions of the firm’s financial manager?


Solutions

Expert Solution

2. Sole proprietorship and Partnerships:

Four Disadvantages-

  • Liability is several & not limited to the share capital, unlike corporates. The proprietors and partners have to make good the losses if incurred even out of their personal assets.
  • There is no separate legal entity like corporate form. Whereas the company can sign contracts and enforce the same under its common seal.
  • It is not possible to run a big business under Sole proprietorship and Partnership mode of constitution., as it requires huge capital contribution and participation.
  • In corporate form, the brand image of the business is enhanced, whereas it is not the case with other forms like proprietorships. Also, it is not easy to avail big credit facilities in partnerships or proprietorships.

Benefits of this form of business over corporate form:

  • It is a simple form of organization, which does not require complex incorporation procedure.
  • Quick decision making: Sole proprietors or Partners can quick take a business decision and execute it unlike corporates, whereas shareholders approvals are required.

3. Corporations:

What is the primary disadvantage of corporate form of business?

                It requires complex incorporation process and requires regular return filings to IRS (separately from personal returns). Decision making and effective control lies with the shareholders jointly instead of a single or few persons.

Name two advantages:

  • Liability is limited to the share capital. Personal assets of the shareholders are not touched, in the event of loss.
  • Separate legal entity. The company can sign contracts and enforce the same under its common seal.

4. Corporate Finance organisation: In large corporates, what are the two distinct groups that report to the CFO? Which group is the focus of corporate finance?

In large corporates, the two distinct groups that report to the CFO are;

  • Accounting and Finance
  • Internal Audit and Compliances.

The finance and accounting group is the focus of the corporate finance as it is this group that oversees the day to day financing and operation of the organization.

5. Goal of Financial management: What goal should always motivate the actions of the firm’s financial manager?

The finance manager should focus on ensuring;

  • Availability of necessary funds for day to day operation of the entity (working capital management)
  • Regular investing of surplus funds for strategic long term requirements.
  • That contracts entered into by the company with customers are beneficial and in the best financial interest of the company.

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