1. Sole Proprietorships and Partnerships. 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?
Disadvantages : Unlimited liability, Limited life, Difficulty in transferring ownership, Hard to raise
capital funds
Advantages : Simple, Less regulation, The owners are also the managers, sometimes personal tax
are better than corporate tax rates
2. Corporations. 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 advantages include limited liability, ease of transferability, ability to
raise capital, and unlimited life.
3. Corporate Finance Organization. In a large corporation, what are the two distinct groups that
report to the chief financial officer? Which group is the focus of corporate finance?
The treasurer’s office and the controller’s office are two primary organizational groups that report
directly to the chief financial officer. The controller’s office handles cost and financial accounting, tax
management, and management information systems. The treasurer’s office is responsible for cash and
credit management, capital budgeting, and financial planning. Therefore, the study of corporate finance
is concentrated within the function of the treasurer’s office.
4. Auction versus Dealer Markets. What does it mean when we say the New York Stock Exchange is
an auction market? How are auction markets different from dealer markets? What kind of
market is NASDAQ?
