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ADMS 3530 Chapter Notes - Chapter 1: Limited Liability Partnership, Legal Personality, Byrsonima Crassifolia

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School
York University
Department
Administrative Studies
Course
ADMS 3530
Professor
Alagurajah

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Document Summary

1. (1) capital budgeting decision/ investment decision: what capital investment projects to invest in and how much to spend on each project. Who can sell them: sarbanes-oxley act, advantages of a corporation, disadvantages of a corporation, public because can use stock market. Private is more time consuming and subject to legal restrictions. 3 problems: (1) sole proprietorship: owned and operated by one individual that is personally liable. Only taxed once. (2) partnership: owned by 2 or more people. Textbook questions: 4, 5, 6, 18, 19, 21, 22, 26, 28: corporate organization. What are the advantages and disadvantages of organizing a. Proprietorship: advantages > easy to form, dissolve disadvantages > unlimited liability, dif culty to raise funds. Partnership: advantages > taxed once disadvantages > unlimited liability. Corporation: advantages > limited liability, separation of owner and managers, equity easily exchanged disadvantage > double taxation, extra cost and time, full disclosure, abide by rules and laws.

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Related Questions

Write at least 600 words plan.

1. Choose one (1) investment plan from following:
a) Opening of a new business
b) Investment in financial securities
c) Investment in Education (Masters and PhD)

Discuss the nature of your investment plan and state for choosing the particular investment. Furthermore, provide the specific details of your investment such as type/nature of the project, overview of the project, estimated/allocated project cost, location, project duration, and expected returns from the project.

2. My Sources of Funds:
Discuss how much of your personal funds can be allocated to your investment plan. You can get details from your portfolio above. Additionaly, provide alternate sources of funds for insufficiency of capital to finance the investment project. ALternative sources may include bank loan, short or long-term financing, government sources and informal sources such family members or relatives. Provide the folowing details of your fund source:

1. Target company or agency for financing
2. Gross amount of funds sources
3. Repayment scheme
4. Terms of financing
5. Security concerns

3. My FInances in the Future
Discuss the implications of your investment project. Provide postive and negative reflecyions on your plan. More so, provide expectations on how the investment plan will help you in your goals to achieve financial wealth and freedom.

This portfolio tests the following outcomes:
1. Analyse the reason why individuals buy financial products and the factors that affect their choices
2. Compare the main features of financial products and providers.
3. Analyse the eddects on consumers of changes and trends in the financial market place.

True or false:
1) other things the same, the use of debt financing rdeuces the firm's total tax bill resulting in a higher market value.
2) accounting profits are used to make capital budgeting decisions because generally accepted accounting principles ensure that profits are the best measure of a company's economic activity.
3) as production levels increase, fixed costs stay the same in total, but decrease on a per unit basis
4) a decrease in the level of production results in decreased fixed cost per unit
5) a company that sells common stock and uses the money to pay off a loan is increasing its use of financial leverage.
6) the initial outlay for a new project is an example of an opportunity cosr
7) the guiding rule in deciding if a free cash flow is incremental is to look at a company with, versus without, the new project
8) a company that sells preferred stock and uses the money to pay off a loan is decreasing its amount of financial leverage
9) Jones Blanket Co. Sells blankets for $25 each. The variable cost per blanket is $10 each. If fixed cost is $4,500,000 then the break-even point is 300,000 units.
10) if a project is acceptable using the net present value criteria, then it will also be acceptable under the less stringent criteria of the payback period
11) if a firm imposes a capital constraint on investment projects, the appropriate decision criterion is to select the set of projects that has the highest positive net present value subject to the capital constraint.

1. Creditors' claims on the assets of a company are called: (Points : 2)
 
Net losses
Expenses
Revenues
Equity
Liabilities
 
2. The primary objective of financial accounting is: (Points : 2)
 
To serve the decision-making needs of internal users
To provide financial statements to help external users analyze and interpret an organization's activities
To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services
To know what, when and how muchto produce
 
3. Assets created by selling goods and services on credit are: (Points : 2)
 
Accounts payable
Accounts receivable
Liabilities
Expenses
 
4. The debt ratio is used: (Points : 2)
 
To measure the amount of equity relative to the expenses
To reflect the risk associated with a company's debts
Only by banks when a business applies for a loan
To determine how much debt a firm should pay off
 
5. Net Income: (Points : 2)
 
Decreases equity
Represents the amount of assets owners put into a business
Equals assets minus liabilities
Is the excess of revenues over expenses
Represents the owners' claims against assets
 
6. Internal users of accounting information include: (Points : 2)
 
Shareholders
Customers
Creditors
Government regulators
Line Supervisor
 
7. Risk is: (Points : 2)
 
Net income divided by average total assets
The reward for investment
The uncertainty about the expected return that will be earned from an investment
Unrelated to expected return
 
8. An example of an operating activity is: (Points : 2)
 
Paying wages
Purchasing office equipment
Borrowing money from a bank
Selling stock
Paying off a loan
 
9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)
 
Business entity assumption
Monetary unit assumption
Value assumption
Cost assumption
Time period assumption
 
10. Distributions of assets by a business to its stockholders are called: (Points : 2)
 
Dividends
Expenses
Assets
Retained earnings
Net Income