bus 320 chap 1

Marketing

Budgets, marketing research, marketing financial products

Accounting

Preparation of financial statements

Management

Strategic thinking, job performance, profitability

Personal finance

Budgeting, retirement planning, college planning, day-to-day cash flow issues

capital budgeting

what projects should the business take on?

Capital structure

How should we pay for our projects?

Should we use debt or equity?

Working capital management

How do we manage the day to day finances of the firm?

Board of Directors

CEO, COO

Vice President of Finance (CFO) or finacial manager

The top manager within a firm

Treasurer

Cash manager, credit manager, captial expenditures, finanical planning

Controller

Tax Manager, Cash Accounting Manager. Financial Accounting Manager, Data Processing Manager

Sole Proprietorship

Business own by one person

Advantages of Sole Proprietorship

Easiest to start, least regulated, keep all profit, taxed once as personal income

Disadvantages of Sole Proprietorship

Limited to life of owner, equity capital limited to personal wealth, unlimited liability, difficult to sell part of your ownership interest

Partnership

Two or more persons come together as co-owners

Advantages of partnerships

more capital, easy to start, income taxed once as personal income

Disadvantages of Partnership

Unlimited liability, except limited partner, dissolves when one partner dies or wishes to sell their part, difficult to transfer ownership

Corporation

A legal “person” (entity), legally functions separate and apart from owners

Advantages of corporations

Limited liability, unlimited life, separation of ownership and management, transfer of ownership is easy, easier to raise capital

Disadvantages of corporation

Greater regulation, no secrecy of information. may delay decision making, double taxation

Double Taxation

income taxed at the corporate rate and then dividends taxed at the personal rate

LLC

business structure legally separating itself from its owners

S-corp

indicates how a business is taxed

LCC tax classification

taxed as though they are another type of business

Goal of corporation

maximize shareholder wealth by maximizing the price of the existing stock

Agency Relationship

Principle hires an agent to represent its interest. Shareholders (principals) hire managers(agents) to run the company

Agency Problem

Conflict of interest between principal and agent.

Managerial Compensation

Incentives can be used to align management and stockholders interests. Incentives need to be carefully structured to ensure that they achieve their goal.

Corporate Control

Threat of a takeover may result in better management

Stake holder

A person, group or organization that has interest or concern in an organization

Sarbanes Oxley Act (2002

US federal law that mandates certain practices in financial record keeping and reporting of publicly trades companies. Must personally attest quarterly and external auditors to personally attest annually.

Limited Liability

ability of a member to limit their liability