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FM-1 Act. 1 Narbonita

This document contains an activity completed by Ranilyn Narbonita, a second year BSBA student. It includes multiple choice questions on business organization forms, a comparison of sole proprietorships, partnerships and corporations, why corporations are more suitable for large organizations, and issues examined by agency theory such as conflicts of interest between principals and agents. It also defines the goals of financial management and depicts the agency relationship between firm owners and managers.

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Kitheia Ostrava Reisenchauer
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70 views2 pages

FM-1 Act. 1 Narbonita

This document contains an activity completed by Ranilyn Narbonita, a second year BSBA student. It includes multiple choice questions on business organization forms, a comparison of sole proprietorships, partnerships and corporations, why corporations are more suitable for large organizations, and issues examined by agency theory such as conflicts of interest between principals and agents. It also defines the goals of financial management and depicts the agency relationship between firm owners and managers.

Uploaded by

Kitheia Ostrava Reisenchauer
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACTIVITY 1

NAME: NARBONITA, RANILYN M. YR & COURSE: BSBA 2- FM


DATE:

A.

1. B

2. A

3. C

4. B

5. D

B.

1. B

2. C

3. A

4. C

5. A

C.

1. Compare and contrast the different forms of business organization.

- A sole proprietorship is an incorporated entity that does not exist apart from its sole owner while a
partnership is two or more people agreeing to operate a business for profit. On the other hand,
corporation is a legal entity existing separate and apart from its owner.

The similarities is when you operate your business as a sole proprietor, you and the business are the
same legal entity, you own the business by virtue of operating it because you make all the decisions. A
partnership works the same except there is more than one owner. Corporations are legal entities that
are separate from the owner.

2. Why is corporation more suitable for a large organization?

Because of legal statutes that endow the incorporated form of business organization with full entity
status. This means corporations, having full entity status, have expanded powers of what can be exercise
and limited range of liability. It also endowed as a separate, legal entity that has the rights of a natural
person. It can buy and sell, enter into contracts, form associations with or own other corporations, own
assets, pay taxes or be exempted from taxes, raise capital in the name of the corporation.
3. What issues does agency theory examine?

 Agency theory examines the conflicts of interest that can arise between principals and agents.

D.

1. Goals of financial management

GOALS OF FINANCIAL
Maximization of the value of the firm
MANAGEMENT

Maximization of shareholders’ wealth

Social responsibility and ethical


behavior

1. Agency relationship

•FIRM OWNERS

SHAREHOLDERS

(PRINCIPAL) • DECISION MAKERS

• RISK BEARING SPECIALIST


MANAGERS
(PRINCIPAL) PAYS COMPENSATION
(AGENT)
TO

• A MANAGERIAL DECISION MAKING

SPECIALIST (AGENT)

AN AGENCY
RELATIONSH
IP

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