There are three major forms of business organizations; sole proprietorship, general partnerships and cooperatives. A sole proprietorship is a business that is not a legal entity owned and run by an individual. The decision making process is fast and dependents on the owner’s preference. The owner is also the main beneficiary of the profits realized by the business. However, the capital required by the business is provided by the owner who is also suffers the losses of the business. The business is terminated in the event of death of the proprietor or when they choose to withdraw by either closing the business or selling it to another individual where he can no longer manage it (Pakroo, 2008).
A general partnership as described by Pride, Hughes & Kapoor (2009) is a business organization formed by two to twenty individuals or entities with an aim of making a profit. It is an easy and inexpensive form of business that does not require many formalities. All partners are involved in management and rising of capital that is required in the running of the business. The losses incurred are also shared among the members. However, profits are divided among the members as per the capital contributions. The decision making process is long since members dispute each others suggestions. In the event that one member makes an unsound decision leading to huge losses, then all the members take responsibility for his/ her actions. In the event of death or withdrawal of a partner, then the business is dissolved unless the agreement written between the partners stipulates otherwise.
A cooperative is a business that is a legal entity that comprises of individuals with common interest coming together with an aim of making profit. The capital required to run he business is raised by members inform of buying shareholders. The members then become shareholders and appoint a board of directors to manage the organization. The main advantage is that a corporation is a legal entity that survives in the event of death or withdrawal of a member. Membership is voluntary and so is the withdrawal. A shareholder can sell their shares and withdraw from the business. The shareholders are entitled to dividends after each financial year on which they are required to pay taxes. However, cooperatives are hard to form as compared to sole proprietorships and partnerships because of the many formalities required (Gitman & McDaniel, 2008) and (Pride, Hughes & Kapoor, 2009).
The financial manager has three major decisions to make; where and how much to invest, source of funds and the amount of dividends offered to shareholders leaving the rest for expansion (Baker & Powell, 2005). In order for the financial manager to make such decisions, he/she should be aware of the objectives of the company. The decisions should also be based on the criterion of maximizing profits for benefit of shareholders and the company in general and acquisition of wealth for the company.
The financial manager according to the decisions he is required to make has goals that seem unattainable. A lot of responsibilities about the financial aspect of the company are left for the financial manager giving room for unsound decisions and also embezzling of funds. The goals should be spread out to other departments or there should be involvement of other managers in assisting the financial manager to make these kinds of decisions.
As indicated in the New York Stock Exchange homepage, NYSE provides a means through which investors can trade their shares in public companies listed for trading. Trading is a form of auction where traders buy and sell stocks on behalf of investors. On the other hand, according to the NASDAQ homepage, it is an electronic screen-based trading market dealing with securities. It indicates the buying and selling price of stocks to avoid spread rate which is meant to benefit traders. NASDAQ provides information about stocks of listed companies just like the NYSE in an electronic board. Both organizations trade in stocks in using an automated system. The New York Stock Exchange however, only deals with stocks for public companies located in the United States while NASDAQ is found in all the six continents in the world making it possible for people in one continent to invest in another.
The Public Company Accounting and Investor Protection Act of as described by Welsh, Ropes & Gray (2002) was a bill enacted in to law as a result of the collapse of major companies leading to the loss of investors’ money. These scandals shook the confidence of the general public in the stock exchange which forced the government to come up with the act to help in protection of investments. The act only applies to public companies and deals with areas of auditing, governance and disclosure of financial reports to enhance the confidence of investors in both the company and the stock exchange.
The stock exchange is a very lucrative place to make money. It is also a place where huge losses can occur if one does not make sound investment choices. As a potential investor, it is important to get as much information about the company you are going to invest in before actually buying the stocks. Seeking the advice of an expert is important to ensure that the investment made has a minimum risk and is bound to give returns (Michael, 2010).
Baker, H. & Powell, G. (2005). Understanding Financial Management: A Practical Guide. USA: Wiley-Blackwell. Print.
Pakroo, H. (2008). The Small Business Start-up Kit. California: Nolo Publishers. Print.
Pride, W., Hughes, R. & Kapoor, J. (2009). Business. USA: Cengage Learning Inc. Print.
Gitman, L. & McDaniel, C. (2008). The Future of Business: The Essentials. USA: Cengage Learning Inc.
Welsh, Ropes & Gray (2002). “The Public Company Accounting Reform and Investor Protection Act of 2002: Public Markets and Government Oversight” Wall Street Journal. July 25, 2002.
Michael, J. (2010). “How to Make Successful Investments in the Stocks.” Ezine Articles Retrieved from (November 11, 2010) HYPERLINK “http://ezinearticles.com/?expert=Micheal_James” http://EzineArticles.com/?expert=Micheal_James
HYPERLINK “http://www.nasdaq.com” http://www.nasdaq.com
HYPERLINK “http://www.nyse.com/home.html” http://www.nyse.com/home.html