Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter21: Risk Management

Section: Chapter Questions

Problem 1QTD

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Despite the fact that the majority of new businesses are sole proprietorships, only a small percentage of big corporations are structured in this manner. One reason single proprietorship is so popular among new businesses is its simplicity. How is the single proprietorship unfavorable to expanding businesses?
If you're worried about infinite liability, what alternative forms of ownership arrangements for your small firm may you pursue?
One of the disadvantages associated with sole proprietorships is that: raising working capital is difficult. acquiring total ownership of the business's finances is not easy. O creating a sole proprietorship is a complicated process. obtaining licenses and permits is difficult. making autonomous business decisions is difficult.
Why would it be desirable to switch from an S corporation to C corporation once the business is growing fast?
Which one of the following is the least likely reason a company may acquire an ownership interest in another company? Select one: a.To benefit form an overvaluing of assets in the investee company b. To oust an inefficient management team c. To take advantage of operating and/or cost synergies d. To exercise an active role in the business' activities
What are some of the conflicts that can arise when a company is owned by group of shareholders but managed by a different group of people? How could you reduce the significance of these conflicts?
Why might a company want to invest in a company rather than buy it outright? Wouldn't they have more say if they bought the company?
What happened to founder-owned U.S. firms as they grew? Control stayed with the founder-owners while management shifted to professionals. They acquired larger companies. Control shifted to professional managers while ownership shifted to shareholders. They remained founder-owned and founder-controlled.
What is a disadvantage of the corporate form? Profit O Revenue Owners have very little influence on business decisions O Limited liability
What are some reasons why the value of a business other than a small one is generallymaximized when it is organized as a corporation?
Which of the following statements is CORRECT? a. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. b. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. c. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers. d. A good goal for a firm's management is the maximization of expected EPS. e. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price.
Which of the following statements is correct? Group of answer choices Corporations and partnerships have an advantage over proprietorships because a sole proprietor is subject to unlimited liability, but investors in the other types of businesses are not. Firms in highly competitive industries find it easier to exercise "social responsibility" than do firms in oligopolistic industries. A good goal for a corporate manager is maximization of expected EPS. A good example of an agency relationship is the one between stockholders and managers. Most business in the U.S. is conducted by corporations; corporations' popularity results primarily from their favorable tax treatment.