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Corporate Finance - Essay Example
Finance & Accounting
Pages 3 (753 words)
Corporate Finance Date Corporate Finance 1. Limited liability entities are organizations in which the owners cannot be held liable for any debts or liabilities held by the company. Once a company is registered as a limited liability company, it sets the owners separate from the company…
These are part of the benefits of registering a business as a limited liability entity. In addition to the company being an individual entity from the owners, a limited liability company offers the owners of equity capital to practice risk aversion skills. Owners of equity are not the managers of their organizations. Instead, they delegate this function to other people who they believe are capable of perfectly handling these duties. This way, the owners of equity reduce the likely of a risk of loss happening. Some investors start a business in an industry which they have little knowledge of. However, by making use of experts in that industry, they significantly reduce their risk of loss. Hired managers undertake their duties with a lot of caution, avoiding causing losses to the organization. Separation of ownership and control is a virtual necessity for the successful financing of large corporations since it leads to high performance which subsequently attracts more investors and increases confidence among creditors. If an organization is managed by separate persons other than the owners, due care and diligence is accorded to the organization by the management. They exhibit high levels of accountability in delivering of their duties and services towards the organization. ...