Question B:
The basic form of business is a single owner business, also known as a sole proprietorship. The main advantage of this form of business is that it provides the control of the entire business to the owner of the business and the owner has the power to direct the business. The owner of the business is entitled to all profits of the business. However, the main disadvantage of the sole proprietorship is that it creates the unlimited liability on the owner of the business. Another form of business is a partnership which provides the opportunity for more than one individual to own the business equally or according to the partnership deed. The main advantage of the partnership is that the partner can invest the higher level of investments as compared to the sole proprietorship. Another advantage is that it limits the liability of the partners to the level of their share in the partnership. However, the main disadvantage is that it creates the unlimited liability for at least one partner. The corporation or the company is the largest form of business which is run by the directors on the behalf of the shareholders by following the agency theory. The directors run the business as the agents of the ordinary shareholders and the main advantage of the corporation is that it creates no liability to the owners of the business. The disadvantage of the corporation is that the owners get their share of profit only when the directors decide to distribute the dividends.
Question D:
The primary objective of the managers or the directors of the business is to maximize the wealth of the shareholders of the business. Therefore, it is the responsibility of the directors to allocate the funds of the business is such ways that they perform well and increase the market value of the share price. The favorable projects for the corporation are those projects which provide the return which is higher than the estimated or budgeted return of the corporation known as WACC. The managers have no obligation to the society or the environment; however, if the business directly damages the environment, then it is the responsibility of the business to restore the damage. Moreover, the firms must act ethically according to the corporate governance codes to increase the level of transparency in the business.
Question N:
The most common type of market is the primary market also knows as the stock exchange markets. In these markets, the shares of listed companies are traded at regular basis and the companies raise their funds via right issue. Another important market is bond market also knows as financial asset market which deals with the compound assets such as convertible loans. The stock exchange or capital markets are the place where the investors buy and sell the stocks or shares of the listed companies to generate capital gain or dividend incomes. Similarly, the future markets are the markets, which are used by the investors or the companies to buy the assets or financial instruments with conditions to buy on agreed terms.
