FINANCIAL PLAN

Financial Plan



Financial Plan

a.

Corporate finance provides manager with the skills to identify and select corporate strategies and projects that add value to the company. Corporate finance enables them to predict the financial needs of the business and the strategies needed to acquire these funds.

b.

There are three main forms of business organizations: sole proprietorships, partnerships and corporations.

1) Proprietorship is a business run by a single owner, is easily and inexpensively operated. It has not many government restrictions and subject to taxes on income. The responsibility of the owner is unlimited and will be liable for debts incurred for its activities on its own property.

2) Partnership is when two or more individuals manage the business. The main advantage is that it is fast, low-cost training and disadvantages are similar to those of proprietorships as well as difficulty of transferring the property generate a lack of obtain large sums of capital.

3) Corporation is a legal entity created by a state, is autonomous and distinct from its creators have unlimited life, is easy to transfer land titles and have limited liability, produce large amounts of capital. The disadvantages we have the utilities are subject to double taxation, many procedures require the establishment.

c.

As a company grows, more capital is needed. The company learns that it is profitable to directly raise funds from investors. This is when the company is willing to sell new financial assets such as shares to the public. The agency problems of interest between the entrepreneur and managers. Corporate governance is a set of processes, practices, policies, laws and institutions that the way the company is directed, administered or controlled.

d.

The primary objective of the business managers is to maximize the value of the firm and the value of investment of the stockholders.

1.

Firms should provide safe working conditions to keep away the contamination of water or air, and for the production of safe products to avoid. However, the most significant cost increases in the shares will be placed on a mandatory rather than voluntary, the burden falls equally on all businesses.

2.

The maximum stock price requires effective and low cost operations, which produce quality goods and services at the lowest possible cost. The maximum price of the shares requires the development of products and services that consumers want and demand that the profit motive leads to the emergence of new technologies, employment and new innovated products.

3.

Yes, the firms should behave ethically. Most managers believe that a positive correlation between ethics and profitability exists in the long run. Conflicts arise between profit and ethics. Companies have to deal with these conflicts periodically, and the inability to handle the situation correctly can lead to severe condition such as going bankrupt.

e.

The price of a firms stock depends on the size of the firm's cash flow, the timing and the risk. The financial environment and decisions regarding investment, financing, and dividend policy affects the value of investment.

f.

Cash flows generated by the operation of the corporation on a defined period, after taxes, after changes in working capital ...