Agency Theory & Small Businesses Essay

Many people want to live the “American Dream”, and what better way to do that than to start a small business. Small businesses are incredibly important to the United States economy. Small businesses have been around from the beginning of the history of the U.S. and remain a large portion of the business community today. Small businesses are the driving force for job creation. Small businesses struggle to meet regulations set in place by the government and at the same time stay afloat in the U.S. economy. There are strict size standards set in place that make small business owners weary of expanding the amount of people they employ. Small business owners also struggle with offering healthcare to their employees. Small businesses try to stay ahead by introducing new and unique products. In an ever-changing economy, it is important to understand the impact of small businesses in the United States.

Likewise, individuals may not need to borrow as much as a usual business loan minimum and to do so would put them in unnecessary debt. Thankfully, some credit unions can offer microloans as little as $200. Such loans could be the key factor for a local family to start a small town business, which promotes economic growth in a community. Without a credit union’s aid, these small businesses would be unable to even begin, thus taking away an opportunity for both the community and its

During testimony to the Small Business Committee it was said that the cost exceeded what Congress ever intended and had outweighed the benefit expected to shareholders and management (Iliev, 2010). The growth of small business is a prominent national interest and an important part of the economy but the regulations are not able to protect investors and simultaneously encourage their growth (Castelluccio, 2005). Fortunately, there have been subsequent laws passed that reduce standards as well as offer opportunities for exemption to certain regulations which offers some relief but not

Our textbook defines an agency problem as a “conflict between the goals of a firm’s owners and its managers” (Megginson & Smart, 2009). It then defines agency costs as dollar costs that arise because of this conflict. In the corporate structure, stockholders are the owners of the firm, and they elect a board of directors to oversee the firm and help protect their investment. The board then hires the right corporate managers to run the firm with the goal of maximizing the wealth of the

Now that the small business idea has become more that just fine print, it is time to put together a loan package that explains the story of the company. There are important questions to answer, demonstrating the company’s ability to correctly make important financial decisions, and detail how the business will pay off the loan. This paper will include the requirements of a loan package, creditor requirements, a ratio analysis, loan justification, and how the company plans to use the proceeds.

Most corporate financing decisions in practice reduce to a choice between debt and equity. The finance manager wishing to fund a new project, but reluctant to cut dividends or to make a rights issue, which leads to the decision of borrowing options. The issue with regards to shareholder objectives being met by the management in making financing decisions has come to become a major issue of recent times. This relates to understanding the concept of the agency problem. It deals with the separation of ownership and control of an organisation within a financial context. The financial manager can raise long-term funds internally, from the company’s cash flow, or externally, via the capital market, the market for funds

Agency problems are said to be inherent in the corporate form of an organization. Why

In the case study written by Marcus Osborn, Kutak Rock LLP the author writes about a financial company called Frist Community Financial. First community financial gives loans to small businesses in the forms of asset-based and factoring loans. They will loan up to $1 million to a small business. These loans are considered high risk, traditional lending firms tend to stay away from small business loans. The relationship between First Community financial and its clientele must be solid in stable due to the loans high risk and expensive interest rates. The company has achieved these well-mannered relationships between clients due to the human resource policies of the company. They

It was important to carry out research on the determination of financial strategies for women-owned small businesses in Florida. Therefore, this research will include studies and combination of research work, to contribute to relevancy for this dissertation (Adkins et.al, 2013). Admittedly, the small business enterprise ought to consider making an exhaustive examination of open markets, by how much the SME can permit to be hazard avoidance, what objectives they need to achieve (both short-term and all the more vital long haul), not to mention that they ought to remember their financial plan. What 's more, Polish economy development is profoundly connected to the execution of SMEs, which is appearing on the exhibited outlines. Besides, it is not diverse in the state of Florida as well, and the circumstance is the same all over the place on the planet. In this way, after numerous changes,

There are many advantages and disadvantages when owning your own business. When you own you own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages.

The small business marketplace is extremely dynamic and the changes are fast. Here are some encouraging facts from the US Small Business Administration on small businesses. There are about 30 million small businesses in the United States and employ just over half of the country’s private workforce. They employ a staggering 40% of high tech workers such as computer professionals, scientists and engineers. More than half of the small businesses are home-based businesses and two percent of them are franchises. One of the most important aspects is the fact that a majority of innovations in the United States come from small businesses.

The economy’s motivation of small businesses stability as compared to large businesses that are well established, also the financial assistance of other organization including the government.

Economic science teaches us that due to their subjective needs, individuals have subjective preferences, and hence different interest. Occasionally different subjective interests give rise to conflicts of interest between contracting partners. These conflicts of interest may result in turn, in one or both parties undertaking actions that may be against the interest of the other contracting partner. The primary reason for the divergence of objectives between managers and shareholders has been attributed to separation of ownership (shareholders) and control (management) in corporations. As a consequence, agency problems

After suitable research,briefly explain the structure of business organisations and give the legal requirement as far as informing stakeholders as to the business financial activities.

As explained by Schelker (2013), the agency problem between the owners and the management of a firm is at the heart of the corporate governance literature. Hence, there is a need for a