Financial Management: Theory And Practice, 2nd Edition Solution Manual

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Answers and Solutions:1-1Chapter 1An Overview of Financial Managementand the Financial EnvironmentANSWERS TO END-OF-CHAPTER QUESTIONS1-1a.A proprietorship, or sole proprietorship, is a business owned by one individual.Apartnership exists when two or more persons associate to conduct a business.Incontrast, a corporation is a legal entity created by provincial and federal laws.Thecorporation is separate and distinct from its owners and managers.b.In a limited partnership, limited partners’ liabilities, investment returns and controlare limited, while general partners have unlimited liability and control.A limitedliability partnership’s (LLP), primary benefit is the protection it offers partners toliability exposure from their partner’s professional negligence.Individual partnersstill maintain unlimited liability to their own negligence or those they directlysupervise.A professional corporation (PC) has most of the benefits of incorporationbut the participants are not relieved of professional (malpractice) liability.c.Shareholder wealth maximization is the appropriate goal for management decisions.The risk and timing associated with expected earnings per share and cash flows areconsidered in order to maximize the price of the firm’s common stock.d.A money market is a financial market for debt securities with maturities of less thanone year (short-term).The New York money market is the world’s largest.Capitalmarkets are the financial markets for long-term debt and corporate stock.The NewYork Stock Exchange and Toronto Stock Exchange are examples of capital markets.Primary markets are the markets in which newly issued securities are sold for the firsttime.Secondary markets are where securities are resold after initial issue in theprimary market.The New York Stock Exchange and Toronto Stock Exchange aresecondary markets.

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Financial Management: Theory And Pr...

Financial Management: Theory And Practice, 2nd Edition Solution Manual

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