1-6 Organizing a Business Sole Partnership Corporation Proprietorship Who owns the The Manager Partners Shareholders business Are managers No N Usuall and owners separate? What is the Unlimited Unlimited Limited owner s (exceptions) liability? Are owners No No Yes the business taxed separately? Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 1- 6 Irwin/McGraw-Hill Sole Proprietorship Partnership Corporation Who owns the business? The Manager Partners Shareholders Are managers and owners separate? No No Usually What is the owner’s liability? Unlimited Unlimited (exceptions) Limited Are owners & the business taxed separately? No No Yes Organizing a Business
1-7 Corporate Structure Sole proprietorships Unlimited liability Personal tax on profits Partnerships Limited Liability Corporations Corporate tax on profits Personal tax on dividends Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 1- 7 Irwin/McGraw-Hill Corporate Structure Sole Proprietorships Corporations Partnerships Limited Liability Corporate tax on profits + Personal tax on dividends Unlimited Liability Personal tax on profits
1-8 The role of The Financial Manager Firms Financial Financial (4a) operations managers markets (3) (4b) (1) Cash raised from investors (2)Cash invested in firm (3) Cash generated by operations (4a)Cash reinvested (4b)Cash returned to investors Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 1- 8 Irwin/McGraw-Hill Financial managers Firm's operations Financial markets (1) Cash raised from investors (1) (2) Cash invested in firm (2) (3) Cash generated by operations (3) (4a) Cash reinvested (4a) (4b) Cash returned to investors (4b) The Role of The Financial Manager
1-9 The role of The Financial Manager SInvestment decisions )Capital Budgeting )Buy real assets that are worth more than they cost Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 1- 9 Irwin/McGraw-Hill The Role of The Financial Manager Investment Decisions ➔“Capital Budgeting” ➔Buy real assets that are worth more than they cost
1-10 The role of The Financial Manager “ Capital Budgeting Tangible assets Nontangible Assets Euro Disney Gillette's Mach3 Razor $2 billion a $300 million Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001
©The McGraw-Hill Companies, Inc.,2001 1- 10 Irwin/McGraw-Hill The Role of The Financial Manager ➔“Capital Budgeting” Tangible Assets Euro Disney @ $2 billion Nontangible Assets Gillette’s Mach3 Razor @ $300 million