Charles Gibson Financial Statement Analysis Chapter 5

| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.

Another central feature of the board of directors is the question of whether the CEO is also the chairman of the board. When the CEO is also the chairman this is often referred to as “CEO duality”. In the US the CEO is often the chairman of the board. Studies have shown that the board in most cases

The primary objective of the manager is to please the stockholder by maximizing stockholder wealth.

General Partnerships are not without their disadvantages. Without being an incorporated company the owners are still subject to issues such as liability, control, and location issues.

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the

Convenience/Burden- Like a general partnership a limited partnership is easily formed and can enjoy pass through-taxation. It can also be easier to get financing with a limited partnership. A downfall of the limited partnership is that the death of a general partner can dissolve the partnership unless a prior agreement has been established.

* Limited partnerships have the convenience of allowing multiple investors as limited partners to assist with cash available to run the business and support improvements or other investments into the company. The burden of running the business falls on the general partner.

Convenience/Burden: Limited Partnerships have extra requirements placed upon them to comply with state regulatory requirements. They must maintain a registered agent to represent them in the state in which they were formed. They are also required to file an informational report with the IRS of the profits passed to the general partners.

the stock is a call option on the firm's assets, and risky projects decrease the volatility of those assets.

Joshua Kennon (2007), stated that “The board of directors is the highest governing authority within the management structure at any publicly traded company and is usually made up of the directors who are elected for a specific number of years by the shareholders”. According to Wikipedia,” A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization”.

To maximize shareholder value through a systematic, disciplined, reliable, ethical, and ongoing process of supply of goods or services.

The Board of Directors are in charge of determining the corporation’s leadership structure on an annual basis and determine if the board will be led by an independent Chairperson or an independent Lead Director. The board has decided that Ronald Sargent, the CEO of Staples, will remain and the Chairman of the board. The Board of Directors is broken down into five committees made up of around three or four board members. Each committee has there own responsibilities and are in charge of making critical decisions that they must assure is communicated properly throughout the entire company. This leadership structure assures that the Board of Directors has a proper balance of leadership roles that allows for a system that prevents any conflict of interests that may come from having the CEO serving on the board.

One major disadvantage of the partnership is taxation, partners will pay the tax same way as a sole trader. Therefore they will pay the corporation tax in addition to this they will have to pay income tax. Another disadvantage is liability partners are still subject to unlimited liability same with a sole trader if the business can’t pay its

One often stumbles upon such statements while reading about shareholders value or maximization of shareholders wealth. This is also a typical answer to questions such as “what is the best and primary objective of a company in a competitive market”. But should it be the only and most important objective in a firm? Must it be fulfilled first and foremost, or is there the possibility of generating more wealth for company, shareholders and stakeholders with other, different approaches? It has