Week #12 Discussion Forum Question-Kazuyo Fujimoto
1)
a) Under the corporation, the owners have limited liability. Therefore, the owners of the corporation are not personally liable for the company’s debts. Sole proprietorship; on the other hand, the business owners are personally responsible for the business debt if the business doesn’t generate enough money to cover expenses.
b) I consider the limited liability is an advantage. I have seen many small business owners closed their businesses and lost their homes under unlimited liabilities.
c) Corporation has some disadvantages such as double taxation, more regulation and difficult to start than forming sole proprietorship and partnership.
2)
a) I will need more
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Approximate market price per share is $40.
b) My personal opinion is that $120 per share to $40 per share doesn’t make so much difference because both prince points are affordable for common person like myself and it doesn’t give me any excitement.
However, if Berkshire Hathaway ($247,120.00 as of December 14th, 2016) will do 10,000-for-1 split, I think many investors get excited and stock price will be affordable for common investors like myself. Hence, more investor will purchase the stock. As a result, price will go up.
Tim Cook, the CEO of Apple Inc. said, “We’re taking this action to make Apple stock more accessible to a larger number of investors.” I think Apples case and Berkshire case make sense but not for $120 to $40 case for me and I think many investors can relate to my opinion.
4) a) Treasury stock transaction has no effect on net income.
b) Total assets will decrease by $11,00- due to cash payment acquiring treasury stock.
c) Total paid in capital amount has no effect.
d) Total stockholder’s equity will decline by $11,000 as a result of ABC, INC’s purchase of buy back its
LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability.
* An owner has unlimited liability both personally and as the company owner. Liability is a disadvantage in a sole proprietorship.
In a general partnership there is also the issue of control. Whereas in a sole proprietorship the sole owner has full control in the business, in a general partnership the control is split equally between the partners. This can lead to issues when the partners do not agree on the direction they want to take the company in regards to growth or other
2) Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form of ownership such as a corporation or LLC?
SOLE PROPRIETORSHIP: Has only one owner. Easy to start up. Some of the advantages are: owners may do whatever they want to with the business and if they want to go on vacation they can. One of the disadvantages they cannot bring in another person to help run the business. This business form is particularly common.
both a and b (Yes. The corporate structure provides for limited liability and ease of transferring ownership.)
D) LLCs are not liable for losses caused due to negligence of their managers during the ordinary
c) Swing is better positioned to take advantage of this opportunity because with a 40% increase in sales at a price of$ 8.5 per unit, it incurs additional profits of $4500; whereas Steady incurs losses of $1500.
Market value per share = Book value per share = $12,000 / 750 shares = $16 per share
B) How well has Berkshire Hathaway performed? In the aggregate? In its investment in Scott & Fetzer? In its investments in earlier purchases of GEICO stock? In its investments in convertible preferred securities?
The maximum share price, if Herbert Kohler is willing to settle with the dissenting shareholders to stop the trail on April 11, 2000, is $120,680. Given the probability of the two outcomes, the expected price for $273,000 per share claim (probability 30%) was $81,900 and the
Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).
On October 31, the stockholders’ equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.
C. What impact does Wiebold's stock split have on (1) total stockholders' equity, (2) total par value, (3) outstanding shares, and (4) book value per share?
Question# 1-1: If you bought a share of stock, what would you expect to receive, when would you expect to receive it, and would you be certain that your expectations would be met?