Finance Chapter 1 Homework The Four Types Firms The Four Major

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Chapter 1

The Corporation

I. Chapter Outline

The following chapter outline is correlated to the PowerPoint Lecture Slides. The PowerPoint slides

are referenced in bold. Alternative Examples to selected textbook examples are also available in the

PowerPoint Lecture Slides and are also referenced in bold.

1.1 The Four Types of Firms (Slide 6)

• Figure 1.1 Chart showing types of firms (Slide 7)

• Sole Proprietorships (Slide 8)

• Partnerships (Slides 9–10)

1.2 Ownership Versus Control of Corporations (Slide 24)

• The Corporate Management Team (Slide 24)

• Figure 1.2 Organizational Chart of a Typical Corporation (Slide 25)

• Interview with David Viniar

1.3 The Stock Market (Slide 32)

• Public and Private Companies (Slide 33)

• Primary and Secondary Markets (Slide 34)

II. Learning Objectives

1-2 Distinguish between limited and unlimited liability, and list firm types that are subject to each

type of liability.

1-4 Discuss the division of corporate ownership into shares of stock; evaluate the implications of

that division for corporate decision making.

1-6 Compare and contrast the characteristics of shares that are publicly traded and those that are not.

1-8 Differentiate between trading on an exchange and trading in a dark pool.

III. Chapter Overview

1.1 The Four Types of Firms

The four major types of firm in the United States are the sole proprietorship, partnership, limited

1. Ease of formation

3. Lifespan of the firm

4. Ease of transference of ownership

The text emphasizes the corporate form. In this chapter, the authors focus on the fact that,

although corporations take a great deal of effort to form, they have some distinct advantages. The life

1.2 Ownership Versus Control of Corporations.

Section 1.2 highlights the separation of ownership and control in the corporation, with particular

1.3 The Stock Market

An important feature of equity investment is its liquidity. Stock markets improve liquidity for

investors by enabling investors to trade shares of public corporations. The NYSE is the world’s

IV. Spreadsheet Solutions in Excel

The following problems for Chapter 1 have spreadsheet versions available: 6 and 7.

These spreadsheets can be downloaded from the Instructor’s Resource Center at: