Could you please answer the following questions with short answers? Q1: Give sev
ID: 2674328 • Letter: C
Question
Could you please answer the following questions with short answers?
Q1: Give several examples of an investmont decisions and financing decisions.
Q2: What are the key differences between a corporation and a sole proprietorship? What is the difference between a public and a private corporation?
Q3: What is the key advantage of separating ownership and management in large corporations?
Q4: How can a small, private firm finance its capital investmonts? Give two or three examples of financing sources.
Q5: Is it possible for an individual to save and invest in a corporation with out lending money to it or purchasing additional shares? Explain.
Q6: What is meant by the separation of ownership and control for public corporations? What potential problems does this seperation create?
Explanation / Answer
(Q1)
Investment options include: Bonds (corporate, government), deposits in banks, equity (publicly trading, private), hedge funds, commodities, fixed assets (real estate for capital gain and rent), gold, silver, foreign currency, etc.
Financing options include: Debt rising through issuing bonds, selling equity, financing through a bank using an asset collateral, etc.
(Q2)
Proprietorship is owned entirely by a single individual and the liability of the proprietorship is unlimited (extending to other personal assets of the individual)
Corporation can be owned and controlled by multiple individuals including public and private share holders (who hold equity) in the company. Its liability is limited, as in the individual is protected in case of bankruptcy with only certain limited assets of the corporation covering the liability.
Public corporation is traded publicly on the stock exchange where as the private one is not.
(Q3)
Separating the ownership and management enable the management to take better unbiased decisions for the corporation, treating the public share holders equally important as the owners of the corporation. This will uphold the integrity at the management level and will ensure the best for the entire company, but not just the stake of the owner.
(Q4)
Small private firms can borrow from a bank using some collateral. Or it can request an investment from a private equity firm or individual investors (though it might be difficult for it to go public and raise capital in an IPO).
(Q5)
Conventionally, financing the corporation (through equity or debt) is the only way to invest in a corporation. But if providing assets to the corporation (like land, building etc. or raw materials etc) can be called investments in the corp then it is possible.
(Q6)
It means individuals other than the owners managing/controlling the corporation. Doing this can potentially increase the conflict between the management and owners increasing the costs associated with management.
Please rate my answer!
Thanks in advance :)