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Business Organization, Essay Example

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Words: 597

Essay

When creating a business there are many factors that need to be sorted. One of the most important factors in creating a business is determining the business organization. The type of business organization determines the structure or foundation which best fits the new company. Each group or individual has different objectives and may feel a certain type of business structure suits their business best. The first factor in deciding the business form and structure is the knowing what the size of the company will be. This factor ties into the individual needs of the owner, if they are looking for a partner, a group, or they want to work it alone. This is extremely important when figuring out legal liability. The essential reasoning in incorporating the business is to protect the personal assets. Financing and liabilities go hand in hand, and when they are smaller they might require a small business loan, or investment. Knowing the type of business structure can protect the owners from liability and risks. Taxes is also essential as the implications are needed when filing as a corporation, sole proprietorship, or partnership.

Business structure is also important is the type of expenses that need to pay when starting your business, and fees they pay each year. When determining the business structure there are four main business structures that include partnerships that protects the partner when either drafting a partner agreement that reports income and losses for each tax return so that it won’t be doubled. Partnerships doesn’t require a lot of paperwork from the state or federal government. Corporations are another business structure that corporations that are more costly than any other form of business structure. It is also difficult to maintain, taxed on income and required to file tax returns. Not only are difficult to navigate to the untrained owner, federal agencies carry stiff regulations and requirements that corporations must meet in order to operate unlike partnerships that operate like a sole proprietorship which is easy.

Stock Ratios

One of the most important stock ratio that assess the performance of the ratio is by the payout ratio. The payout ratio is considered one of the most influential ratio for companies to value their stock and cost of capital.  These ratios are generally referred to as rates on return. The stock ratios measures the profitability of stock by their return on assets and their return on equity. Each ratio takes into account the total average assets and the stockholder’s equity. Equity and assets are the two common measures used to determine book value. Return on investment is a commons stock ratio used when calculating the money a company has gained or lost on an investment or stock.

Risks are very important to potential investors. They have to look at stock and maeausre if in the long run or the short run the stock will be successful or fell. Investors used several mechanism such as stock ratios in order to help value the risks if a stock price is too high. The stock market ratio commonly used is the price/earnings stock ratio that compares the current prices of the stock to its per-share earnings. The ratio calculates dividing the two factor then gauges thee value of the stock. The price earnings ratio generally reflects the expectations of the stock future prospects. When the stock has a high price to earnings ratio compared to other similar stocks, the investors can view the stock as being overvalued, unless the stock is viewed as worth the money in the future, and more importantly what the stock could be worth.

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