1.

1 Capital: What are the two basic sources of funds for all
businesses?
There are two basic sources of funds: debt and equity. Each company
has some assets because the property represents the property in the
company. It consists of the capital contributions of the owners plus the
cash flows that have been reinvested in the company.
Parrino, Kidwell, & Bates (2011).

1.3 Cash flows: Explain the difference between profitable and

unprofitable firms.
The cash flow tells you exactly what is happening inside the company,
so you can know how to deal with the situation, even if it is not what
you planned at the beginning of the year. Therefore, the cash flow
allows to know if a company is fulfilling its obligations and generating
profits, in addition also if the investment is being recovered, which are
the factors to analyze whether a company is profitable or not A company
that is in the process of returning the investment or that has already
returned it, a company that can fulfill the obligations that contracted
and that in a certain time can generate profits, according to projections
of return is profitable, for the opposite, those that do not enter the
previous group will not be It is also profitable if the cash inflow is
greater than the cash outflow.
1.5 Cash flows: What is the appropriate decision rule for a firm
considering undertaking a capital project? Give a real-life example.
faces?
Financing decisions because they determine the way companies obtain
and manage long-term financing to acquire and support their productive
assets. For example, a company must decide how to finance a project
by analyzing different options, which may be different financial entities,
which offer different methods of payment, terms and fees or benefits,
The company is the one who must decide what is best for you to what
they offer
1.7 Management role: What are some of the working capital decisions
that a financial manager
Select the productive assets of the company, financing decisions on how
to pay those assets. Also choose suppliers and type of raw material,
among other decisions.
In summary are 3
1. Capital budgeting decisions: Identifying the productive assets the firm
should buy.
2. Financing decisions: Determining how the firm should finance or
pay for assets.
3. Working capital management decisions: Determining how day-to-
day financial matters should be managed so that the firm can pay its
bills, and how surplus cash should be invested.
1.9 Organizational form: What are the advantages and disadvantages
of a sole proprietorship?

Advantages:
The decisions are made by the same, do not share authority or profits
with anyone Disadvantages:
It needs more capital, the costs increase, the risks are only his, the
responsibilities are also only of the entrepreneur. You cannot offer extra
benefits to your employees like shares or other company incentives. The
direction is somewhat more complex because it is a single person who is
responsible for this task, although it can delegate roles
1.11 Organizational form: Who are the owners of a corporation, and
how is their ownership represented?
The owners are the owners of the company, who have rights over it,
their property is represented in the economic value of it is that of their
actions, the assets that are part of the company.

1.13 Organizational form: What is double taxation?

Double taxation is a principle of taxation that refers to income taxes
paid twice in the same source of income. It can happen when income is
taxed at a corporate and personal level. Double taxation also occurs in
international trade when the same income is taxed in two different
countries.
Double taxation often occurs because corporations are considered
separate legal entities from their shareholders. As such, companies pay
taxes on their annual earnings, just like individuals. When corporations
pay dividends to shareholders, such dividend payments incur income tax
liabilities to the shareholders who receive them, although the profits
that provided the cash to pay the dividends were already taxed at the
corporate level.
1.15 Finance function: What is the primary responsibility of the board of
directors in a corporation?

The Internal Auditory, Audit the risks in each process or department,

prepare the external audit documents, monitor, control and investigate,
take care and monitor costs
1.17 Firms goal: What are some of the drawbacks to setting profit
maximization as the main goal of a company?

The first thing is that the term benefit is not understood correctly, since
the entrepreneurs think that the benefits are only the income minus the
expenses. But without understanding that its growth depends on a set of
accounting rules that must balance the costs and benefits. The other is
that the accounting profits are not necessarily the same as the cash
flows. Finally, you only want cash in order to be able to invest without
considering that there are other long-term benefits that have value
1.25 Information asymmetry: Describe what an information asymmetry
is in a business transaction. Explain how the inequity associated with an
information asymmetry might be, at least partially, solved through the
market for goods or services.
The asymmetry of information when a party has more information than
its counterpart about the characteristics of the good the service that is
the subject of the transaction.
Information asymmetry is a market failure that can prevent a perfect
balance of competition or even prevent any transaction in a market.
Indeed, when a buyer has less information than the seller, he may not
be willing to pay the requested price without having any guarantee as to
the quality or other qualities of the goods or services.
The solution is the balance of information that avoids suspicions, speculations and
distrust
REFERENCES
Parrino, R., Kidwell, D. S., & Bates, T. (2011). Fundamentals of
corporate finance. John Wiley & Sons.