1. A single individual that makes the business decisions, receives all the profits, & is legally responsible for all the debts of the firm owns a proprietorship.

a. Advantages: a proprietorship is easy to form and dissolve; all decision-making powers reside with the sole proprietor; a proprietorship is taxed only once.

b. Disadvantages: the proprietorship faces unlimited liability for debts of the firm & has limited ability to raise funds; the business normally ceases to exist with the death of the proprietor.

2. Two or more who share profits or losses owns a partnership.

a. Advantages: partnerships are easy to form, experience relatively low costs of monitoring job performance, permit more specialization than sole proprietorships, & are only taxed once.

b. Disadvantages: partnerships face unlimited liability & more difficulty in decision-making (relative proprietorship); dissolution of the partnership is usually necessary when a partner dies or leaves the partnership.

3. A corporation is a legal entity that may conduct business in its own name, just as an individual does. The owners of the co

(b) Lenders can require borrowers to put up collateral.

d. In order to reduce the problems that arise from asymmetric information, various countermoves have evolved.

4. Stocks, bonds, & reinvestments of retained earnings are the most important sources of corporate financing.

8. Leading the way toward a globalized economy is worldwide financial integration.

5. Both businesses & investors engage in financial transactions in primary & secondary markets.

b. Multinational corporations with a wide array of financial services operate worldwide.

Some topics in this essay:
, Wall Street, asymmetric information, moral hazard, stock market, information exists transaction, asymmetric information exists, markets purchases sales, price today’s price, owners corporation, ability raise, unlimited liability, easy form, lenders reduce, borrowers lenders, random walk,