a)
To determine: The definition of proprietorship,
a)
Explanation of Solution
A company owned by one individual is a proprietorship or sole proprietorship. When two or more persons are associated to conduct business, a partnership exists. A corporation, on the other hand, is a state-created legal entity. The organization is independent of its owners and managers. A charter shall contain the following information:
- Proposed corporation’s name
- Types of activities it will follow
- Capital stock amount
- Number of directors
- Names and addresses of directors.
The bylaws are a set of rules established by the company's founders. Included are the following points:
- How to elect directors (all elected annually or perhaps one-third each year for 3-year terms)
- Whether current stockholders will have the first right to purchase any new shares in the company issues.
- Procedures for modifying the bylaws themselves will include conditions.
b)
To determine: The definition of limited partnership, limited liability partnership, professional corporation.
b)
Explanation of Solution
In a limited partnership, the liabilities, investment returns, and control of limited partners are limited, while the liability and control of general partners are unrestricted. A limited liability partnership (LLP), also referred to as a limited liability company (LLC), blends a corporation's limited liability advantage with a partnership's tax benefits. A private company (PC), known as a professional association (PA) in some countries, has most of the incorporation privileges, but members are not exempted from professional (malpractice) liability.
c)
To determine: The definition of stockholder wealth maximization.
c)
Explanation of Solution
Maximizing Stockholder wealth is the right objective for management choices. In order to maximize the price of the common stock of the firm, the risk and timing related with expected earnings per share and cash flow are considered.
d)
To determine: The definition of
d)
Explanation of Solution
A money market is a (short-term) debt securities financial market with maturities of less than one year. The money market in country N is the biggest capital market in the world. Capital markets are the long-term debt and business equity financial markets. The example of a capital market is the NY Stock Exchange. Secondary markets are where shares are resold on the primary market after the initial issue. A secondary market is the NY Stock Exchange.
e)
To determine: The public market and derivatives.
e)
Explanation of Solution
Standard contracts are exchanged on regulated exchanges in public markets. A significant number of individuals eventually hold shares sold on public markets, such as common stock and corporate bonds.
Derivatives are statements whose value is dependent on what happens to some other asset's value. Two significant types of derivatives are future and options, and their values be subject to on what happens to other asset prices, say IBM stock, country J yen, or pork bellies. The value of derivative security is therefore derived from the value of a real asset that underlies it.
f)
To determine: The definition of investment bank, and financial intermediary.
f)
Explanation of Solution
An investment banker is a business-to-saver middleman. Investment banking houses assist with corporate securities design and then sell them in primary markets to savers (investors). A financial intermediary purchases securities through the sale of its own securities with funds it obtains. An example is a common stock mutual fund purchasing common stocks with funds obtained through the issuance of shares in the mutual fund.
g)
To determine: The money market fund.
g)
Explanation of Solution
Money market funds are mutual funds that make investment in short-term debt instruments and offer privileges of inspection to their shareholders; therefore, they are essentially interest-bearing inspection accounts.
h)
To determine: The definition of physical location exchange, computer/ telephone network.
h)
Explanation of Solution
Exchanges of physical location have face-to-face communication between securities buyers and sellers. A computer/telephone network, on the other hand, electronically links buyers and sellers, not face-to-face.
i)
To determine: The definition of open outcry auction, dealer market; automated trading platform.
i)
Explanation of Solution
An open-outcry auction is a way for buyers and sellers to match. The buyers and sellers are face-to-face in an auction, each stating the prices and buying or selling them.
A dealer in a dealer market holds a security inventory and makes a market by proposing to buy or sell. Others who want to buy or sell can see the dealers ' deals and can contact the dealer of their choice to arrange a deal.
An automated trading network is a computer system where buyers and sellers post orders and where trades are performed to match orders automatically.
j)
To determine: The definition of production opportunities, time preferences for consumption.
j)
Explanation of Solution
Opportunities for production are the returns arising from investment in productive assets within an economy. The higher the chances of growth, the more producers are willing to pay for the capital required. The priorities in the consumption time apply to the desired consumption pattern. Consumer's consumption time expectations decide how much consumption they are willing to defer, and therefore save, at different interest rates.
k)
To determine: The definition of foreign
k)
Explanation of Solution
When businesses and individuals in the U.S. experience a foreign trade deficit. S. Import more goods than they are exported from foreign countries. Trade deficits need to be funded, and debt is the main source of funding. Therefore, debt financing increases as the trade deficit increases, driving up interest rates.
Country U Interest rates must be consistent with foreign interest rates; if the Federal Reserve tries to set interest rates below foreign rates, investors would sell U.S. bonds, leading to higher U.S.
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Chapter 1 Solutions
INTERMEDIATE FINAN.MGMT.(LL)-W/MINDTAP
- Classify the following users of information as: Internal Users, External Trading Partner, External Stakeholder Internal Revenue Service Inventory control manager Board of directors Customers Lending institutions Securities and Exchange Commission Stockholders Chief executive officer Suppliers Bondholdersarrow_forwardWhich of the following forms of business organization can finance its operation through acquiring bank term loan and by issuance of equity securities? Â Â General Professional Partnership Single proprietorship Limited partnership Corporationarrow_forwardMatching type. Match these 4 investments into its corresponding definition below 1. Investment in trading securities. 2. Investment in long-term securities. 3. Investment in associates accounted for using the equity method. 4. Investment in subsidiary Definitions: a. to take advantage of flunctuations of prices in the market b. to exert significant influence over another entity so as to obtain benefits from its operations c. To earn investment income such as interest and dividend and additional source of liquidity such as selling investments as the need arises. d. For trading purposes, for speculative purposes, and to manage risk exposures if used as a hedging instrument e. to exert control over another entity thus enabling the investor to be entitled to variable returns from its involvement with the investee f. to earn rental income and for capital appreciation.arrow_forward
- Match each corporate characteristic 1 through 8 with the description that best relates to it. Characteristic Descriptions 1. Transferability of ownership 2. Ability to raise large capital amounts 3. Duration of life 4. Legal status Entity with similar rights as individual 5. Ease of formation High because buying stock is attractive 6. Government regulation Indefinite 7. Mutual agency More severe than partnerships and proprietorships 8. Owner authority and control TT TT Oarrow_forwardMultiple choice: All of the following are forms of business organizations except: A. proprietorship B. partnership C. corporation D. governmental unit 2. An entity where ownership is divided into shares of stock is a: A. proprietorship B. trade agreement C. corporation D. mutual agencyarrow_forwardIn the functional responsibility of the Phillipines Stock Exchange, which of the following considered as one of the most critical responsibility? a. business development and information group   b.finance and investment group  c.operations/automated trading group  d. listing and disclosure grouparrow_forward
- . It is a type of business combination wherein an investor, having an existing involvement in the investee, acquires additional investment in order to obtain control over the investee. a. Business combination achieved by contract alone b. Business combination achieved by mere exchanges of equity interests c. Business combination achieved in stages d. Baby step combinationarrow_forwardMaintaining relation with financiers comes under ______________ objective of financial management. a.Research Objectives b.Social Objectives c.Basic objectives d.Operational Objectivesarrow_forwardTask Two Define the following terms: 'stakeholder'; 'shareholder' and 'stakeholder analysis'. Using a named real company of your choice, demonstrate how you would apply the stakeholder analysis process to identify the company's stakeholder groups and evaluate their needs and influence.arrow_forward
- Which of the following is the primary goal of a firm? Select one: O a. maximize stockholder wealth O b. maximize dividend payments Oc minimize expenses O d. satisfaction of suppliersarrow_forwardWhen financal statements are used by shareholders and irwestors to evaluate the performance of a company's top execuoves it is referred to as the function of financial reports. Minde Choice proxy tectrical. Semedsho friminetealarrow_forwardWhich one is LEAST likely to be considered in developing financial strategies?a. Investment and growth opportunitiesb. Public relations and media coveragec. Financing optionsd. Alignment of the business strategy and the financial strategyarrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning