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Running head: MINICASE
a) Why is corporate finance important to all managers?
Every corporate decision a company makes has financial implications (Damodaran,
1996). Corporate finance is therefore significant to managers since it enables them to ascertain
and select strategies for the task at hand. It also enables managers to estimate the funding
necessities of the organization and formulate ways of obtaining the funds.
b) Describe the organizational forms a company might have as it evolves from a startup to
a major corporation. List the advantages and disadvantages of each form.
An organization can go through three forms: sole proprietorship, corporation, and
partnership. A sole proprietorship is a distinct enterprise possessed by a single person. It is
relatively easy to form, it has fewer regulatory requirements, and lack corporate taxes. However,
the business has a short lifespan, unlimited liability, and it is difficult to raise capital since it
solely depends on the sole proprietor for funding.
A partnership is an agreement between two or more individuals who go into business
with the aim of making a profit. The advantages of a partnership are as follows; it is easy to
establish, has limited external regulations, and a low start-up cost. The disadvantages include;
there is a higher risk of disagreements and friction among partners and management, debt
liability of the business is unlimited, and profits have to be shared among all partners.
A corporation is a legal entity distinct from its managers and owners. It has an unlimited
lifespan, limited liability, ease of raising capital and transferring ownership. However,
corporations usually require...
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