Financial

Liability- This falls directly on the owner. All debts, liabilities and losses fall on the owner. The owner's assets can be used to alleviate the business's debt.

• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.

c. Smaller payments mean more time in debt. d. Your lower interest loans also get rolled into the deal so you end up with minimal savings.

LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability.

* An owner has unlimited liability both personally and as the company owner. Liability is a disadvantage in a sole proprietorship.

Liability: The owner/operator of a Sole Proprietorship is subject to full and unlimited financial liability for the business. The owner and the company are legally the same entity. The company’s assets are legally the same as the owner’s personal assets.

Asymmetry in the credit markets result in a wedge between the costs of external funds (i.e. from banks and other lenders) to the public, and the cost of internal funds. Thus, internal funds, bank loans and other sources of financing are imperfect substitutes for firms. These imperfections related to credit market frictions causes monetary policy changes to affect both the bank-lending channel and the balance sheet channel \citep{Gertler1995}.

* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities

What is a financial intermediary? A financial intermediary is an organization that raises money from investors and provides financing for individuals, companies and other organizations. Intermediaries are a stop on the road between savings and real investment. Mutual funds and pension funds are two important classes of intermediaries. A financial institution usually suggests a more complicated intermediary doing more than just pooling and investing savings. Banks and insurance companies are good examples.

In the most basic definitions of economics, the United States’s Financial system is broken down into approximately five groups: the households, the firms, the market for factors of production, the market of goods and services, and the government. Within these groups, there is a constant flow that progresses in a circle through all of these groups in order to keep the economy running smoothly. This system is based on the notion that both consumers and producers need to come together to transact. However, buyers don’t always have the money they need to buy supplies, and sellers don’t always have the money to produce products or provide services. When this occurs, it is important for both investors and banks to offer aid in order to prevent

Ch.1 financial intermediation results from economies of scale and the specialization of financial transactions. (banks, inv. companies [mutual & pension funds], insurance companies, credit unions, brokerage firms, investment banks). Inv. banks assist firms in raising capital, create the market for innovative new securities that meet the risk and return demand (CMOs, collateralized mortgage obligations – derivative security that separates the cash flows of a mortgage pool into different classes with different maturities and risks). risk and return are the most important characteristics of financial assets. Another is tax. (high tax-bracket investors would, other things equal, would prefer tax-exempt securities [municipal bonds]).

Taken as a whole, the money markets, stock markets, and OTC markets facilitate efficiency within the financial markets that ensures funds from savers are directed to their best sources. Not only does this help the US economy grow, but it also “facilitates the international flow of funds between countries” (“Please explain how financial markets,” 2005).

deductions for ordinary and necessary business expenses and deductions for losses taken by owner personally to extent of other income (including spouse 's income if reported on joint return) and without any basis limitation

A financial intermediary, by definition, is responsible for the process of transferring money from economic agents with a surplus of funds to economic agents with a deficit of funds, and is known as financial intermediation. This is achieved by means of a financial security, such as stocks and bonds. The mechanism that allows the trade of such financial securities is known as a financial market. Financial markets aim to facilitate the raising of capital, as well as the transfer of risk between economic agents and also international trade. Typically, the borrower will issue a receipt, or financial security, to the lender that promises to pay back the capital gained. Securities such as these can be freely bought or sold within financial

Note that lenders are suppliers of funds (surplus units) while borrowers are demanders/users of funds (deficit units)