MAF203 Lecture Notes - Lecture 1: Capital Asset Pricing Model, Accounts Payable, Legal Personality
Document Summary
Business finance = a set of rules and financial decisions that control how we run business. Company decisions = asset management, working capital management, capital structure, payout policy, merger and acquisitions etc. Investment decisions = portfolio theory, asset pricing etc. Advantages: easy and inexpensive to form no legal requirement to be met, combines wealth and talent of, separate legal entity limited liability. Disadvantages: unlimited liability, difficult for partners to withdraw their investment, disputes between partners can be damaging, more expensive to establish, taxation treatment of companies may be a disadvantage (cid:858)agency costs(cid:859) disputes about who makes decisions. Business owned by one person control rests with owner. No treated as separate entity for tax purposes. Disadvantages: not a separate legal entity (unlimited liability, size of business is limited by wealth of the owner, ownership can only be transferred by selling business to new owner. Co(cid:373)pa(cid:374)y"s fi(cid:374)a(cid:374)(cid:272)ial o(cid:271)je(cid:272)tive: shareholder wealth maximisation: revenue, earnings, share price.
