Marge Harper has invested $100,000 in Southwest Development Company
Subject: Business   / Finance
Question
1. Marge Harper has invested $100,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $360,000 in unpaid debts. Explain the nature of payment, if any, by Ms. Harper in each of the following situations.
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a. Southwest Development Company is a sole proprietorship owned by Ms. Harper.
b. Southwest Development Company is a 60-40 general partnership of Ms. Harper and Christopher White.
c. Southwest Development Company is a corporation.
2. Suppose you decide to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area, and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO, then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions.
a. What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist? Explain your answer.
b. If you expanded, and hired additional people to help you, might that give rise to agency problems?
c. Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?
3. Does the goal of shareholder wealth maximization conflict with behaving ethically? Give an example of a company that did this.
4. What were the causes of the crisis of credit?
Below are some videos that you may find helpful. Please watch the Crisis of Credit video.
Legal Forms of Business Organization
Business Organizations (TedEd)
Securitization http://ed.ted.com/on/OKiuHvug
Credit Default Swaps
http://ed.ted.com/on/hs0ONXIM
Crisis of Credit
http://crisisofcredit.com/
