FINS1613 Chapter Notes - Chapter 1: Dividend Imputation, Contract, Capital Structure
Document Summary
Sole proprietorships owned & operated by an individual, profits taxed as personal income (ptpi) Advantages - simple to establish, least regulated, few regulations, owner receives all profits. Disadvantages - difficult to raise funds, unlimited liability, limited to life of owner, difficult ownership transfer. Partnerships owned & operated by 2+ individuals/entities. Formed by an informal or legally binding agreement. Advantages - cheap to establish & run, owners receive all profits. Disadvantages - unlimited liability, hard to raise funds, difficult ownership transfer, life limited to partners. Advantages - easily transferable ownership, unlimited life, limited liability, able to raise large amounts of $ Disadvantages - legal formalities & disclosure requirements, 2x taxation unless dividend imputation system. Investment decision how funds are used in productive activities, capital budgeting planning long term investment. Financing decision capital structure, mix of debt & equity financing, Working capital management ensure firm has enough funds to run daily operations, Dividend decision how much to distribute as dividends.
