Assignment: 2-2: Critical Thinking Questions 1. Describe the cash flows between a firm and its stakeholders. First the cash flows are generated by productive assets through the sale goods and services to the customers, but before that they invests the cash in current and fixed assets to generate more cash to produce the goods, the firm use these cash inflows in many ways: to pay wages and salaries, pay to suppliers , pay taxes and pay debt. In the end any cash left they divided into two parts: cash flows reinvested in business and paid as dividends to stockholders. What are the three fundamental decisions the finance team is concerned with, and how do they affect the firm's balance sheet? The finance team is concerned with three fundamental decisions: 1. Capital management decision that deal with day to day financial matters and affect in current …show more content…
Financing decisions determine the firm's capital structure the combination of long-term debt and equity that will be used to finance the firm's long-term productive assets. What is the difference between stockholders and stakeholders? Stockholders are the holder of stock in a corporation. Stakeholder is that one has an interest or affected by a corporation such as employees, suppliers, customers and others. Suppose that a group of accountants wants to start their own accounting business. What organizational form would they most likely choose, and why? In me opinion it will be Professional Companies (PCs) because it has good advantages it have the limited liability of a corporation and tax advantage of a partnership Why would the owners of a business choose to form a corporation even though they will face double taxation? They choose a corporation because some rezone: Protects personal assets, they have limited liability for business, corporation easiest to change ownership and greatest access to source of funds. Explain why profit maximization is not the best goal for a company. What is an appropriate