Financial Management (MBA)

QUESTION-1

Part- A (1

As Mr .Patrick Brennan is a very young business person and having better aspirations , it is not better for him to retain his establishment under the Proprietorship structure . Considering the growth shown in his business graph , I advice Mr .Brennan to get your organization incorporated as soon as possible . I hereby point out three general advantages that the corporate structure has over the proprietorship structure

First of all , when a firm is incorporated it becomes a distinct legal entity . Its life commences from the date of

incorporation . It enjoys all the legal privileges laid down by the respective countries

Secondly , it acquires a perpetual succession . The members may come and go , but it goes on for ever , unless it is wound up

Its property is not the property of the shareholders . The shareholders have a right to share in the profits of the company when realized and divided . Likewise , any liability of the company is not the liability of the individual shareholders (2

A characteristic feature of corporate enterprise is the separation between ownership and management as a corollary of which the latter enjoys substantial autonomy in regard to the affairs of the firm . In the corporate structure shareholders are the owners of the enterprise and the management is the agent of the owners . The shareholders delegate the decision making authority to professional management on the premise that the latter will work in the interest of the former . In to ensure that management would take...