The Essence of Business Corporation Models.Key Natures and Benefits of Business Corporation.

April 20, 2010 by oscadmin · 3 Comments
Filed under: Business Management 



Business Corporation
A corporation is one of the few business entities that actually takes on a separate legal persona. Although a corporation is not a living being, like Joey, or Hewlett and Packard, it has legal rights like a person. A corporation is considered a “legal or fictional person” that has a perpetual lifetime. It can own property, sign contracts, pay taxes, and otherwise participate in society (but a corporation cannot vote for mayor or the president of the United States like a human citizen can). A corporation usually has a board of directors who supervise and advise the chief executive officer (the CEO, who is often a member of the board of directors). The board of directors has a fiduciary duty to protect the corporation’s interests and livelihood, as well as the interests of the shareholders (sometimes those are not the same). Corporations sell ownership shares to people, trusts, and other corporations. Unlike a proprietorship or partnership, owners of the corporation are not personally liable for actions of the corporation, and their personal losses are only as large as their investment in corporate stock (shares). But officers of a corporation are increasingly being held accountable for corporate misdeeds. The Sarbanes-Oxley Act of 2002 now requires corporate officers to sign off on the financial statements and guarantee that no one has been cooking the books.




Most corporations are publicly traded corporations whose shares are bought and sold on an exchange, like the New York Stock Exchange or NASDAQ. Some corporations are private or closely held, and the stock of these entities is rarely traded, and if so, only directly when a seller has a ready buyer (that is, not on an open and public stock exchange).




There are several benefits to a corporation: limited liability, perpetual lifetime, the idea that it is a separate entity or “fictional person,” and the ability to raise large amounts of capital (cash) from a wide variety of places. There are also some downsides to incorporation (the act of turning a business into a corporation): lots of paperwork (a corporation, especially one that is publicly traded, must produce reams of paper for government regulators, stockholders, and anyone else who is interested), double taxation (the corporation is taxed on its profits, and shareholders are taxed again on any dividends they earn), and market oversight (the company’s value will vary day to day depending on the price of the shares).

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Investor Guide to Balanced Financial Growth. Investment Risk and Return by Asset Class.

April 8, 2010 by oscadmin · 4 Comments
Filed under: Investment 



BALANCED FINANCIAL GROWTH

A sound plan for achieving financial security requires balanced financial growth. In seeking balanced financial growth, the investor must continually evaluate risk and return. It is said that risk and reward go hand in hand. An investment providing the opportunity for higher returns will generally involve higher risk. Conversely, an investment offering lower returns will generally involve lower risk. In seeking higher returns, only the individual investor can determine exactly how much risk to take. The higher on the investment pyramid, the greater the risk . . . the lower on the investment pyramid, the lower the risk.




Cash reserves and equivalents provide a financial cushion for emergencies, repairs, and other unexpected cash needs. Typically, this base will include money market accounts, life insurance cash values, regular savings, and certificates of deposit. Adequate health, property, and casualty insurance is also essential to provide protection from financial disaster.

Equity assets can be purchased if the investor’s primary objective is to achieve capital appreciation. However, it is important to understand that the market value of these investments can go down as well as up, and rates of return can vary, even after the investments are purchased. Stocks, mutual funds, and variable annuities are all examples of equity assets found in many investment portfolios. Some equity assets may provide current income, while others will accrue income or reinvest earnings with the expectation of realizing greater appreciation.




Income assets should be considered if the investor’s objective is to obtain income, as opposed to growth. Some investments will provide immediate dividends or interest income; others will accrue earnings until maturity. A variety of debt assets are available with many different characteristics.

Income funds offer investment management with the objective of providing maximum income consistent with security of principal. Fixed dollar annuities pay a guaranteed and stable income no matter how long a person lives. Corporate, municipal, state, and federal bonds are issued in a variety of forms and maturity dates.

Tangible assets are tax-advantaged investments that involve the greatest risk. Because of this, they are for the sophisticated investor who has already established a firm financial foundation and is interested in tax deductions providing the opportunity for speculative profit. They include real estate ventures, research and development partnerships, oil and gas partnerships, farming, cattle and coal operations, and leasing arrangements.

Investment Risk and Return by Asset Class

Risk and Return by Asset Class

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