In: Accounting
a |
Corporate finance is the area of
decisions relating to the capital of the company. The company can
procure capital from mainly two sources, being debt and equity.
Equity participants are the owners of the company, while debt is
similar to borrowing. Debt can be obtained after increasing some credibility. The company initially accumulates some capital through equity, increases its business and further obtains debt. Corporate finance is important for all the people in management as it relates to the decisions of how much capital to obtain, what form to obtain capital in, capital structure decisions, etc. |
b |
The forms of business organization
have developed. The basic form of business organization is sole proprietorship, where a single person starts the business with his personal capital or borrowing. All the profits earned by the business are taxed in his hands. There are various advantages and disadvantages of this form of business. Advantages are - Absence of corporate taxes, Easy running of business due to being alone in deicsion making authority, etc. Disadvantages are - Limited capital (as there is only one person), personal liability (personal assets can be used to clear debts), limited continuity (as there is no guarantee of running of business if the proprietor dies) The next form of business is partnership, where two or more (upto 20) people join to form a business, coontribute capital, and distribute profits and losses in a fixed ratio. Advantages are - Large capital (as more people are involved), Less complex structure of business, etc. Disadvantages are - Personal liability (personal assets can be used to clear debts), The next advancement of business form is company, which has the features of unlimited continuity, separate legal entity, etc. |
c |
Stakeholder management is a concept to
be followed by the organizations, which demonstrates managing
various interests of stakeholders. Stakeholders are people who are interested and affected by the organization, like shareholders, creditors and suppliers, bankers and lenders, government, regulators, etc. The interests of stakeholders are varied, and diverse. The organization must manage the varying interests to ensure the stakeholders do not act in their interests, which may be detrimental to the organization's interests. Once the borrowing terms and cost become higher, the companies start to go public (especially if cost of equity is less than cost of debt). |
d |
Stakeholder management is a concept to
be followed by the organizations, which demonstrates managing
various interests of stakeholders. Stakeholders are people who are interested and affected by the organization, like shareholders, creditors and suppliers, bankers and lenders, government, regulators, etc. The interests of stakeholders are varied, and diverse. The organization must manage the varying interests to ensure the stakeholders do not act in their interests, which may be detrimental to the organization's interests. The value of the company is determined by the people's expectations about the future. The stock price reflects the people's expectations. |