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Managerial Finance

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Managerial Finance
FIN515 Homework1 Mini case
(a) Corporate Finance
Investors provide enough funding for corporations to make quality goods and services that are highly valued by costumers and enables growth of the corporation. So managers’ primary goal is to generate enough cash to distribute compensation to investors. Understanding corporate finance allows managers to make monetary decisions that achieve the goal of adding value for investors and thus contribute to a company’s competitiveness and profitability in long run.

(b) Organizational Forms
There are three types of organizational forms for companies to choose based on different expected speed of growth and the amount of owners. The easiest way to start a business is to begin as a proprietorship, which is owned by one person. It subjects to the minimum amount of government regulations and tax liability. However, the life proprietorship is limited to the life of owner. The owner is subject to unlimited liability. Also, founder is hard to raise capital for a proprietorship to meet growth requirements.
If a company has two or more owners, it forms a partnership. Owners of partnership companies are also liable for all the debt. However, limited partnership allows limited owner liable to the amount he invested. Partnership is subject to less regulation and tax but harder to raise capital than corporation. Corporation is the only legal entity that is separated from owners and managers. Even though it is complicated to form a corporation, and corporation is subject to double taxation, but its advantage of unlimited life, limited liability and most importantly the ability to transfer ownership makes it the ideal organizational form for fast growing companies.

(c) Initial Public Offering (IPO)
Corporations can continue to grow through external financing, which sells stock to the public investors…...

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