Chapter 1 Introduction to Financial Management 1. What are the four primary disadvantages to the sole proprietorship and partnership forms of business organization? What benefits are there to these types of business organization as opposed to the corporate form? The four primary disadvantages of a sole partnership and partnership forms of business organizations are limited lifetime, difficulty in transferring ownership, unlimited liability, and it is also hard to raise capital funds. There however some advantages though like simpler less regulation, the owners are also the managers and sometimes-personal tax rates are better than corporate tax rates.
2. What is the primary disadvantage of the corporate form of organization? Name at least two of the advantages of corporate organization.
The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some of the advantages include a limited liability, ease of transferability, ability to raise capital, and unlimited life. 3. Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding stock. Your company’s management immediately begins fighting off…