Fin 2513

TABLE OF CONTENTS
NO
1.
2.
3.
4.
5.
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7.
8.
CONTENTS
PAG
E
Table of Contents
Acknowledgement
Topic One
Topic Two
Topic Three
Topic Four
References
Appendix
1
2
3
9
16
24
30
31
ACKNOWLEDGEMENT
In the name of Allah, The Most Gracious, The Most Merciful, all the praises
and thanks be to Allah, the Lord of the Alamin, for we have finished our FIN 2513
Assignment 1 for the session of January - June 2014.
FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1
We would like to express our gratitude towards our FIN 2513 lecturer, Miss
Yasmin binti Ishak for her guidance, comments, remarks and advice throughout the
whole process required by this assignment.
Furthermore, our gratitude extends to our parents for their encouragement
and support, not to mention financial obligation.
We also give special thanks to the people who, one way or another had
shared in our making of this assignment.
May Allah, subhana wa taala, bless and guide us to the right path.
Thank You.
TOPIC ONE
In Malaysia, business entity may be classified into three basic types; sole
proprietorships, partnerships and corporations. An individual who plans to conduct
business in this country in the form of sole proprietorships and partnership must
register their business entity with the Registry of Business, On the other hand, if he
plans to set up a company, then he has to register it with the Registry of
Companies.
A) WHY IS THERE TREMENDOUS DIVERSITY IN THE TYPES

OF BUSINESS IN MALAYSIA INDUSTRIES?
Nowadays, Malaysian had become one of developing country and will reach our
vision for the nation to achieve a self-sufficient industrialized nation by year 2020.
So, our business industry also growing as well as what had been proposed by our
Prime Minister Datuk Seri Najib Tun Razak and fit to Malaysia as developing country.
Business industries in Malaysia had been growth and there are many type of
business industries such as sole proprietorships, partnerships, corporation, general
partnership, limited liability partnership (LLP), limited liability limited partnership
(LLLP), non-profit corporation, limited liability company, join venture, municipality
and association. But the basic types of business are sole proprietorships,
partnerships and corporations.
B)
DISCUSS
THE
ADVANTAGES
AND
DISADVANTAGES
INHERENT IN EACH OF THE DIFFERENT BUSINESS TYPES.
Types of business :
SOLE PROPRIETORSHIP / SOLE TRADER

Definition : Sole Proprietorship is a business that's owned by just one person.
ADVANTAGES
We as the boss
We will keep all the profit
debts as there's no legal distinction
Start- up with lower cost
between
Easy to change our legal structure if
assets.
circumstance change
Can easily wind up our business
DISADVANTAGES
We will have unlimited liability for
Our
private
capacity
to
and
raise
business
capital
difficult and limited.
is
without any objection.
All the responsibility for making dayto-day business decisions is by our

own.
It can be hard to take holidays
Taxed as a single person
Types of business :
PARTNERSHIP
Definition : Partnership is a business owned by two or more people.
ADVANTAGES
Company will have sufficient capital.
By doing partnership they are more

flexible in term of management.
Partners have to shares liability and

financial risks of the business.
The partners must pay taxation for

the business.
Partners can share their opinion in

making decision and can help each
partners
because of different idea.
Partners can share the responsibility

of the running of the business.
DISADVANTAGES
Disagreement
between
Partners
also
must
share
profit
other out when they need to.
equally.
Types of business :
LIMITED PARTNERSHIP
Definition : A form of partnership similar to a general partnership, except that in
addition to one or more general partners, there are one or more limited partners.
ADVANTAGES
An advantage to organizing as a
limited partnership is that we do not

have
to
pay
both
personal
and
Each
DISADVANTAGES
partner is held personally
responsible for those losses.
That if one of the business general
business taxes.
partners dies, the company dissolves
A limited partner's liability for the
unless
partnership's debt is limited to the
business will continue.
partners
agree
that
amount of money or property that

the
individual partner contributed to the

partnership.
The general partners deal with the

daily operations and responsibilities
and don't need to consult the limited
partners for most business decisions.
Types of business :
CORPORATION
Definition : A corporation is a fully independent business (when public) that's made
up of multiple shareholders who are provided with stock in a new business.
ADVANTAGES
Corporations can obtain more capital
DISADVANTAGES
The process of integration requires
through the sale of their actions
more time and money to compare to
Corporation
other models of organization.
file
taxes
separately
from their own.
The corporations are supervised and
Corporation are generally able to
subject to rules of entities: federal,
attract and hire high quality amd
state and some local, and therefore
motivated employees because they
might have to comply with many
offer competitive benefits.
more
requirements
administrative
and
documents
to
demonstrate compliance
C) ONE OF THE DISADVANTAGES FOR CORPORATION IS

DOUBLE TAXATION. EXPLAIN HOW CORPORATE PROFITS
ARE TAXED TWICE.
DEFINITION
It is a term used to describe the way taxes are imposed on corporate shareholders
and on corporations. The corporation is taxed on its earnings (profits), and the
shareholders are taxed again on the dividends they receive from those earnings.
EXPLANATION
It is called as double taxation because taxed will be charged on earnings and on the
dividend that have been received from the earnings. It is occur when a tax is
imposed more than once on the same asset, income stream or transaction. Besides,
double taxation also can be occur if two or more countries assume jurisdiction over
the same asset, income or transaction.
EXAMPLE
Corporate profits are taxed when they are earned and the taxed again as personal
income when distributed to shareholders as dividend or as salary.
TOPIC TWO
A) DESCRIBE THE THREE (3) PRIMARY WAYS IN WHICH
CAPITAL IS TRANSFERRED BETWEEN SAVERS AND
BORROWERS.
DEFINITION
Saver
The person who regularly saves money through a bank or recognized scheme.
Borrower
Someone who receives something on the promise to return it or its equivalent.
The THREE primary ways capital is transferred between savers and borrowers firstly
is direct transfer, investment banking house, and financial intermediary.
Direct Transfer
Direct transfers of money and securities occur when a business sells its stocks or
bonds directly to savers, without going through any type of financial institution.
Securities
Saver
BusinessNv bvbjgnbnfod
Dollars
Investment Banking House

Transfers through an investment banking house occur when a brokerage firm, such
as Merrill Lynch, serves as a middleman and facilitates the issuance of securities.
These middlemen help corporations design securities that will be attractive to
investors, buy these securities from the corporations, and then resell them to savers
in the primary markets.
Securities
Securities
Business
Saver
Investment Banker
$$$
$$$
Financial Intermediary
Transfers through financial intermediaries occur when a bank or mutual fund obtains
funds from savers, issues its own securities in exchange, and then uses these funds
to purchase other securities.
Intermediaries literally create new forms of capital. The existence of intermediaries
greatly increases the efficiency of money and capital markets.
Business securities
Business
$$$
Intermediary
$$$
Savers
Intermediaries
Securities
The Financial Intermediaries have seven types. It consists of:

1
Commercial banks
Savings and loan associations
Mutual savings banks
Credit unions
Pension funds
Life insurance companies
Mutual funds
10
B) EXPLAIN IN DETAIL THE TEN (10) DIFFERENT TYPES OF

FINANCIAL MARKETS.
PRIMARY MARKETS vs. SECONDARY MARKETS

Primary Markets
The market where
investors
purchase newly issued securities.

Eg. Initial public offering (IPO); an
initial public offer occurs when a
company offers stock for sale to
the public for the first time.
Secondary Markets
A market where previously issued
securities or used securities are
traded among investors.
Eg. IPO earlier on purchased by

Elly Group & after 1 year this
company sells the shares to Anuar
Group then, these shares will no
11
longer know as IPO & the

transaction will take place in the
secondary market.
MONEY MARKETS vs. CAPITAL MARKETS

Money Markets
Short term securities (a maturity
Capital Markets
The market for relatively long
of 1 year or less) are traded in the

money market.
Eg. T-bills, negotiable certificate of
deposits,
commercial
paper
term
(greater
than
year
maturity) securities.
Eg. Bonds and stocks.
&
bank notes ( short term bank

loan )
PHYSICAL ASSET MARKETS vs. FINANCIAL ASSET

MARKETS
Physical Asset Markets
Know as tangible/real assets
market.
Eg.
Real
Financial Asset Markets

Deals with stocks, bonds, notes,
mortgages and other claims on
estate,
computer,
real assets.
machinery, autos, wheat etc.
SPOT MARKETS vs. FUTURE MARKETS

Spot Markets
Future Markets
12
Assets are being bought and sold
Assets are being bought and sold
on the spot.
It is a real time market.
Goods are sold for ready cash &
on the future; the participants
delivered immediately.
agree to buy or sell an asset at

some future date.
PRIVATE MARKETS vs. PUBLIC MARKETS

Private Markets
A place where transaction are
Public Markets
A place where standardized
worked out directly between 2
contracts are traded on organized
parties.
exchange (normal stock

exchange).
C) BRIEFLY EXPLAIN THE TERM INITIAL PUBLIC OFFERING

(IPO).
DEFINITIOn
IPO (initial public offering) is the first sale of a companys shares to the public,
leading to a stock market listing, known as a flotation in the UK. This is done by
listing the shares on a stock exchange of the company's choosing such as the
London Stock Exchange.
explanation
13
An IPO is also referred to as a public offering, this is a sale of securities to the

general public, rather than directly to select institutional or large investors (as in
private placement).
Shares are offered to the public for various reasons including to:
help raise money for the company and to finance growth opportunities or
rebalance the balance sheet
broaden the companys shareholder base
provide liquidity when it comes to trading shares in the company
generate publicity for the company

Empirical studies show that the main reason for listing is the creation of
paper money to finance acquisitions.

At the same time, a listing carries a number of costs including the obligation
to produce financial statements, adopt corporate governance codes and pay
dividends when required. Quoted companies need to have investor recognition and
they are also subject to shareholder monitoring. Finally, there is a possibility of a
change of control.
The most debated costs of IPOs relate to the issuance costs which appear to
be high (about 11% of the proceeds), underpricing (the fact that the first day
trading price is in general higher than the offer price), and the post-IPO stock price
performance which, on average, is negative. Given their relatively high level of risk,
ipos should normally generate positive returns.
A number of theories are provided to explain this puzzle. These include
signalling as IPOs suffer from high information asymmetries, agency conflicts,
market sentiment, investment banks, short sellers, sales by major shareholders/
lockup expiry, and fundamental difficulties in valuing young and high growth
companies.
An offering can also include new shares, as in an IPO, or previously issued
stock, as in a secondary offering.
14
In a flotation, shares are issued in the primary market, this is where new
securities are issued and sold directly by the issuer to investors. Any trading after
that takes place on the secondary market - where something is traded after having
initially been sold (on the primary market) by the original owner or issuer.
A company will need to hire lawyers and an investment bank when making
plans to go public. Preparation includes an underwriting process by a syndicate
made up of a group of investment banks. The bank will help value the shares,
prepare a prospectus containing information about the company and help generate
some interest about the shares among investors.
Example
In May 2012, Facebooks IPO at $38 valued the company at $104bn, propelling it
into the ranks of the top 25 US public companies. However, since flotation, the stock
price of facebook carried on decreasing, reaching about $19 in August 2012.
But what is Facebook really worth? Our interactive valuation calculator illustrates
how variations in key assumptions can change the potential market value and share
price of an IPO.
TOPIC THREE
BASED ON THE FOLLOWING DIAGRAM, PLEASE EXPLAIN THE
RELEVANT MATTERS IN DETAIL.
DEFINITIOn
~ INVESTOPEDIA
15
(http://www.investopedia.com/terms/c/cashconversioncycle.a
sp)
A metric that expresses the length of time, in days, that it takes for a company to
convert resource inputs into cash flows. The cash conversion cycle attempts to
measure the amount of time each net input dollar is tied up in the production and
sales process before it is converted into cash through sales to customers. This
metric looks at the amount of time needed to sell inventory, the amount of time
needed to collect receivables and the length of time the company is afforded to pay
its bills without incurring penalties.
~ CI Staff
(http://www.aaii.com/computerizedinvesting/article/the-cashconversion-cycle.mobile)
The cash conversion cycle (CCC) measures the time (in days) that it takes for a
company to convert resource inputs into cash flows. In other words, the cash
conversion cycle reflects the length of time it takes a company to sell inventory,
collect receivables, and pay its bills. As a rule, the lower the number, the better.
This is because, as the cash conversion cycle shortens, cash becomes free for a
company to invest in new equipment or infrastructure or other activities to boost
investment return. Also, the cash conversion cycle can be useful in comparing close
competitors and assessing management efficiency.
~ Wikipedia
(http://en.wikipedia.org/wiki/Cash_conversion_cycle)
In management accounting, the Cash conversion cycle (CCC) measures how long a
firm will be deprived of cash if it increases its investment in resources in order to
expand customer sales. It is thus a measure of the liquidity risk entailed by growth.
However, shortening the CCC creates its own risks: while a firm could even achieve
16
a negative CCC by collecting from customers before paying suppliers, a policy of

strict collections and tax payments is not always sustainable.
Diagram 1
Explanation
When a company acquires inventory (also known as goods or stock) it will be
in account payables. A company can sell their product(s) on credit and this will
become the companys accounts receivable. The term cash is not involved in this
processes unless the company pays for its account payable (Debts that must be
paid off within a given period of time in order to avoid default.) and collects its
17
account receivables (When a company has receivables, this means it has made a
sale but has yet to collect the money from the purchaser.)
The Cash Conversion Cycle is extremely important for retailers and similar
businesses. This is because it illustrates how quickly a company can convert its
products into cash through sales. Therefore, the shorter the cycle, the less time
capital is tied up in the business process, and thus the better for the company's
bottom line.
The aim of studying cash conversion cycle and its calculation is to change the
policies relating to credit purchase and credit sales. The standard of payment of
credit purchase or getting cash from debtors can be changed on the basis of reports
of cash conversion cycle. If it tells good cash liquidity position, past credit policies
can be maintained. Other than that, its aim is also to study cash flow of business.
Cash flow statement and cash conversion cycle study will be helpful for cash flow
analysis. The Cash Conversion Cycle readings can be compared among different
companies in the same industry segment to evaluate the quality of cash
management.
The Cash Conversion Cycle is a combination of several activity ratios
involving accounts receivable, accounts payable and inventory turnover. Account
Receivable and inventory are short-term assets, while Account Payable is a liability;
all of these ratios are found on the balance sheet. In conclusion, the ratios indicate
how efficiently management is using short-term assets and liabilities to generate
cash. This allows an investor to gauge the company's overall financial position.
As a result, when a company sells what people want to buy, cash cycles
through the business quickly. However, if management cannot figure out what sells,
the Cash Conversion Cycle slows down. For instance, if too much inventory builds
up, cash is tied up in goods that cannot be sold which is not good news for the
company. To move out this inventory quickly, management might have to slash
prices, possibly selling its product at a loss. If Account Receivable is handled poorly,
18
it means that the company is having difficulty collecting payment from customers.
This is because Account Receivable is essentially a loan to the customer, so the
company loses out whenever customers delay payment. The longer a company has
to wait to be paid, the longer that money is unavailable for investment elsewhere.
On the other hand, the company benefits by slowing down payment of Account
Payable to its suppliers, because that allows it to make use of the money longer.
Calculation
To calculate CCC, you need several items from the financial statements:
Revenue and cost of goods sold (COGS) from the income statement
Inventory at the beginning and end of the time period

19
AR at the beginning and end of the time period
AP at the beginning and end of the time period
The number of days in the period (year = 365 days, quarter = 90)
Inventory, Account Receivable and Account Payable are found on two different
balance sheets. If the period is a quarter, then use the balance sheets for the
quarter in question and the ones from the preceding period. For a yearly period, use
the balance sheets for the quarter (or year end) in question and the one from the
same quarter a year earlier.
This is because while the income statement covers everything that happened
over a certain time period, balance sheets are only snapshots of what the company
was like at a particular moment in time. For things like AP, you want an average
over the time period you are investigating, which means that AP from both the time
period's end and beginning are needed for the calculation.
The cash conversion cycle is actually a collection of three activity ratios related
to the turnover in inventory (accounts receivable), all of which are expressed in
days. The formula for the cash conversion cycle is as follows:
Formula:
20
Days Inventory Outstanding (DIO)

Days Inventory Outstanding (DIO) addresses the question of how long (in days) it
takes for a company to sell its entire inventory. Usually, the smaller the number, the
better.
DIO = Average inventory Cost of goods sold per day

Average inventory = (beginning inventory + ending inventory)
2
Cost of goods sold per day = annual cost of goods sold 365
Days Sales Outstanding (DSO)

21
Days Sales Outstanding (DSO) calculate the number of days a company needs to
collect on sales. Cash-only sales have a DSO of zero, but many companies allow
customers to buy on credit. Usually, the smaller the number, the better.
DSO = Average accounts receivable Revenue per day

Average accounts receivable = (beginning accounts receivable +
ending accounts receivable) 2
Revenue per day = annual revenue 365
Days Payable Outstanding (DPO)

Days Payable Outstanding (DPO) measure how long it takes for a company to pay its
bills (accounts payable). The longer a company is able to hold its cash, the better its
investment potential. In this case, a longer DPO is better.
DPO = Average accounts payable Cost of goods sold per

day
Average accounts payable = (beginning accounts payable +
ending accounts payable) 2
Cost of goods sold per day = annual cost of goods sold 365
Example
Cash conversion cycle American Products is concerned about managing cash
efficiently. On the average, inventories have an age of 90 days, and accounts
22
receivable
are collected in 60 days. Accounts payable are paid approximately 30 days after
they
arise. The firm has annual sales of about $30 million. Assume there is no difference
in the investment per dollar of sales in inventory, receivables, and payables;
and a 365-day year.
A Calculate the firms operating cycle.
OC
= Ave. Inventories + Acc. Receivable

= 90 + 60
= 150 days
B Calculate the firms cash conversion cycle.

CCC
= OC (Operating Cycle) APP (Account Payable)

= 150 30
= 120 days
C How should the firm manage its inventory, accounts receivable, and accounts
payable in order to reduce the length of its cash conversion cycle?
The firm should have the least amount of inventory possible (as long as there are
no stock out which result in lost sales), the least amount of accounts receivable
(collect accounts receivable quickly) and the greatest amount of accounts payable
(stretch payments as long as possible).
TOPIC FOUR
Having dealt with the size of investment in current assets, the methods of financing
of working capital needs our attention. Working capital is financed both internally
23
and externally through long term and short funds, through debts and ownership
funds. Explain in detail the THREE (3) basic approaches to financing working capital.
By using your own business scenario, which approach do you think will suit you
best?
HEDGING APPROACH
DEFINITION
When applying the hedging approach, the funds for acquiring fixed assets and
permanent current should be acquired with long term funds and for temporary
working capital, short term funds should be used.
Explanation
The term hedging is very often used in the se nse of risk reducing investment
strategy involving transactions of a simultaneous but opposing nature so that the
loss arising out of one transaction is likely to offset in the other due to the
financing mix. The term hedging can be said to refer to the process of matchi ng
maturities of debt with the maturities of financial needs. That is why it is called
matching approach. According to this approach, the maturity of the sources of
funds should match the nature of the assets to be financed. For analytical
purpose Current Assets can be broadly classified into:
Those, which require certain amount for given level of operation and
hence do not vary over time.
Those, which fluctuates over time.
This approach suggests that long-term funds shoul d be used to finance the fixed
portion of Current Assets requirements as spelt out in a manner similar to the

financing of fixed assets. The purely temporary requirement that is the sea sonal
variation over and above the permanent financing needs should be appropriately
financed with short-term funds or Current Liabilities.
24
Example
A stock trader believes that the
stock price of Company XYZ will rise
over the next month, due to the
company's
new
and
efficient
method of producing widgets. He

wants to buy Company XYZ shares
to profit from their expected price increase, as he believes that shares are currently
underpriced. But Company XYZ is part of a highly volatile widget industry. So there
is a risk of a future event that affects stock prices across the whole industry,
including the stock of Company XYZ along with all other companies.
Since the trader is interested in the specific company, rather than the entire
industry, he wants to hedge out the industry-related risk by short selling an equal
value of shares from Company XYZ 's direct, yet weaker competitor, Company ABC.
The first day the trader's portfolio is:
Long 1,000 shares of Company XYZ at $1 each
Short 500 shares of Company ABC at $2 each
The trader has sold short the same value of shares (the value, number of shares
price, is $1000 in both cases).
If the trader was able to short sell an asset whose price had a mathematically
defined relation with Company XYZ's stock price (for example a put option on
Company XYZ shares), the trade might be essentially riskless. In this case, the risk
would be limited to the put option's premium.
25
On the second day, a favorable news story about the widgets industry is published
and the value of all widgets stock goes up. Company XYZ, however, because it is a
stronger company, increases by 10%, while Company ABC increases by just 5%:
Long 1,000 shares of Company XYZ at $1.10 each: $100 gain
Short 500 shares of Company ABC at $2.10 each: $50 loss (in a short
position, the investor loses money when the price goes up)
The trader might regret the hedge on day two, since it reduced the profits on the
Company XYZ position. But on the third day, an unfavorable news story is published
about the health effects of widgets, and all widgets stocks crash: 50% is wiped off
the value of the widgets industry in the course of a few hours. Nevertheless, since
Company XYZ is the better company, it suffers less than Company ABC:
Value of long position (Company XYZ):
Day 1: $1,000
Day 2: $1,100
Day 3: $550 => ($1,000 $550) = $450 loss
Value of short position (Company ABC):
Day 1: $1,000
Day 2: $1,050
Day 3: $525 => ($1,000 $525) = $475 profit
Without the hedge, the trader would have lost $450 (or $900 if the trader took the
$1,000 he has used in short selling Company ABC's shares to buy Company XYZ 's
shares as well). But the hedge the short sale of Company ABC a net profit of $25
during a dramatic market collapse.
26
CONSERVATIVE APPROACH
DEFINITION
Conservative approach suggests that in addition to fixed assets and permanent
current assets, even a part of variable current assets should be financed from longterm sources. The short-term sources are used only to meet the peak seasonal
requirements. During the off season, the surplus fund is kept invested in marketable
securities. This approach depends upon the long-term sources to a great extent.
Explanation
The financing policy of the firm is said to be conservative when it depends more on
long-term funds for financing needs. Under this approach, the firm finances its
permanent assets and also a part of temporary Current Assets with long-term
financing.
In
the
periods
when the firm has no need

for
temporary
Current
Assets, the idle long-term

funds can be invested in
tradable
securities
to
conserve liquidity.
AGGRESSIVE APPROACH
DEFINITION
27
Aggressive approach depends more on short-term funds. More short-term funds are
used particularly for variable current assets and a part of even permanent current
assets, the funds are raised from short term sources.
Explanation
A firm may be said to be adopting an aggressive policy when it used more of shortterm financing than warranted by the matching plan. Under this approach, the firm
finances a part of its permanent Current Assets with short-term financing. Some
extremely aggressive firms may even finance a part of their fixed assets with shortterm
financing.
Relatively
more the use of short-term

financing makes the firm more
risky.
Following table gives a summary of the relative costs and benefits of the three
different approaches:
FACTORS
Liquidity
Profitability
HEDGING
CONSERVATIVE
AGGRESSIVE
APPROACH
Moderate
Moderate
APPROACH
More
Less
APPROACH
Less
More
28
Cost
Risk
Asset Utilization
Working Capital
Moderate
Moderate
Moderate
Moderate
More
Less
Less
More
Less
More
More
Less
We chose HEDGING APPROACH.

Our business scenario is a partnership of selling various clothing items both
domestically and internationally. The BEST approach that would suit us best is the
hedging approach. Like any other wealth-building practices, hedging involves both
benefits and drawbacks. These benefits and pitfalls differ with trading style,
investment preferences, market changes, other risk-minimizing practices and
trading goals. In short, the benefits that one gets from hedging our risks can be not
there for other trader.
By using the hedging approach, it helps in making very good short-term riskminimizing strategy for long-term traders and investors. Also, hedging tools can also
be used for locking the profit. It enables traders to survive hard market periods. If
we manage to perform successful hedging, this will give the trader protection
against commodity price changes, inflation,currency exchange rate changes,
interest rate changes, and more. Hedging can also save time as the long-term
trader is not required to monitor/adjust our portfolio with daily market volatility.
Hedging using options provide the trader an opportunity to practice complex
options trading strategies to maximize our return.
REFERENCES
http://www.investopedia.com/terms/c/cashconversioncycle.asp
http://www.aaii.com/computerizedinvesting/article/the-cash-conversioncycle.mobile
http://en.wikipedia.org/wiki/Cash_conversion_cycle
http://www.businessdictionary.com/definition/double-taxation.html
29
http://www.investinganswers.com/financial-dictionary/tax-center/double
taxation-1138
http://www.klmanagement.com.my/blog/type-of-business-entities-in-malaysia/
http://bls.dor.wa.gov/ownershipstructures.aspx
http://onlinebusiness.volusion.com/articles/business-types/
http://yourbusiness.azcentral.com/limited-partnership-advantagesdisadvantages-1380.html
APPENDIX
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TABLE OF CONTENTS

A) WHY IS THERE TREMENDOUS DIVERSITY IN THE TYPES

INHERENT IN EACH OF THE DIFFERENT BUSINESS TYPES.

SOLE PROPRIETORSHIP / SOLE TRADER

We will keep all the profit

debts as there's no legal distinction

Start- up with lower cost

Easy to change our legal structure if

Can easily wind up our business

difficult and limited.

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

without any objection.

All the responsibility for making dayto-day business decisions is by our

It can be hard to take holidays

Taxed as a single person

By doing partnership they are more

Partners have to shares liability and

The partners must pay taxation for

Partners can share their opinion in

because of different idea.

Partners can share the responsibility

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

other out when they need to.

limited partnership is that we do not

responsible for those losses.

That if one of the business general

partners dies, the company dissolves

A limited partner's liability for the

partnership's debt is limited to the

business will continue.

amount of money or property that

individual partner contributed to the

The general partners deal with the

through the sale of their actions

more time and money to compare to

other models of organization.

from their own.

The corporations are supervised and

Corporation are generally able to

subject to rules of entities: federal,

attract and hire high quality amd

state and some local, and therefore

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

motivated employees because they

might have to comply with many

offer competitive benefits.

C) ONE OF THE DISADVANTAGES FOR CORPORATION IS

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

Investment Banking House

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

The Financial Intermediaries have seven types. It consists of:

Savings and loan associations

Mutual savings banks

Life insurance companies

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

B) EXPLAIN IN DETAIL THE TEN (10) DIFFERENT TYPES OF

PRIMARY MARKETS vs. SECONDARY MARKETS

purchase newly issued securities.

Eg. IPO earlier on purchased by

FIN 2513 | FINANCIAL MANAGEMENT | ASSIGNMENT 1

longer know as IPO & the

MONEY MARKETS vs. CAPITAL MARKETS

of 1 year or less) are traded in the