BUS 320 : question answer
19 May 2011
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Chapter 1 some answers of critical questions: disadvantage, unlimited liability, limited life, difficulty in transferring ownership, hard to raise capital funds. Advantage: simpler( less regulations, control (owners are also managers, personal tax rates are better than corporate tax rates, in the corporations, shareholders are the owners of the firm. Shareholders elect the directors of the corporation, who in turn, hire the firm"s management. The separation of ownership from control in the corporate form of the organization is what causes agency problem. Management may act in its own/someone else"s interest rather than those of shareholders. If such things occur, they may contradict the goals of maximizing the share price of the equity of the firm: non-profit organizations frequently pursue social/political missions. One goal is minimization i. e. provide whatever goods or service at the lowest cost for society. A better approach may be to observe that even for a non-for-profit business has equity.
