@Managerial finance@ -- Chapter 1 Finance-- the art and science of managing money. Financial services-- the area of finance concerned with the design and delivery of advice and financial products to individuals, business, and government. Managerial finance-- concerns the duties of the financial manager in the business firm. Financial manager-- actively manages the financial affairs of any type of business, whether financial or non financial, private or public, large or small, profit seeking or not-for-profit. Sole proprietorship-- a business and by one person and operated for his or her own profit. Unlimited liability-- the condition of a sole proprietorship (or general partnership) allowing the owner's total wealth to be taken to satisfy creditors. Partnership-- a business and by two or more people and operated for profit. Articles of partnership-- the written contract used to formally establish a business. Partnership Corp.-- an artificial being created by law (often called a legal entity). #Strengths and weaknesses of the common legal forms of business organization. *Sole proprietorship Strengths: *.The owner receives all profits (and sustains all losses) low organizational costs *.income included and taxed on proprietors personal tax return *.Independence *.secrecy *.ease of dissolutionWeaknesses *.Owner has unlimited liability -- total wealth can be taken to satisfy debts *.limited fundraising power tends to inhibit growth *.proprietor must be Jack of all trades *.difficult to give employees long-run career opportunities *.lacks continuity when proprietor dies Partnership Strengths *.Can raise more funds than the sole proprietorship borrowing power enhanced by more owners *.more available brainpower and managerial skill *.income included and taxed on partners personal tax return *.Owners have limited liability, which guarantees that they cannot lose more than they invest... Weaknesses: *.Owners have unlimited liability and may have to cover debts of other partners *.partnership is dissolved when a partner dies *.difficult to liquidate or transfer partnership Corp. Strengths: *.can achieve large size via a sale of ownership (stocks) ownership is readily transferable *.Long life of firm *.can hire professional managers *.has better access to financing *.can offer a tract of retirement plans Weaknesses: *.Taxes generally higher, because corporate income is taxed, and dividends paid to owners are also taxed at a maximum 15% rate *.more expensive to organize than other business forms *.subject to greater government regulation *.lacks secrecy, because stockholders must receive financial reports.