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Introduction to Industrial Finance

Primary Goal of a business

To earn profit.

Organizing a Sole Proprietorship

To increase its own value as an
economic entity


To improve the quality of life in
a community

1. DTI (Department of Trade Industry)


Refers to the ability of the
weather the ups and down in
the economy or ability to
continue operations despite
anticipated risk

Owner’s equity:

Is the difference bet total assets
and total liabilities of an entity
so that it is also called net

Improving the Quality of life in
the community:

A business entity provides
employment opportunities not
only to its own organization but
also in other entities that are
directly or indirectly affected by
the business

Forms of Business Organization
A business organization may be in the
form of:

Sole proprietorship



Sole Proprietorship -is a type
of business entity that is owned
and run by one individual, the

2. Barangay
3. Mayor's Office
4 BIR (Bureau of Internal Revenue)
5.1 SSS (Social Security System)

5.2 PHIC (Philippine Health Insurance Corporat
5.3 Home Development Mutual Fund

Advantages of a Sole
Control. The owner has complete
control over the business.
Simplicity. A sole proprietorship is
easy to start and operate.
Inexpensive. Startup organization
expenses are minimal since few, if
any, legal documents need to be
created to begin the enterprise.
No double taxation. The business is
not treated as a separate taxable
entity. The business income is
reported on the owner's individual tax
return and is therefore only taxed

Liability – Ordinary Partnerships are subject to unlimited liability. property. Decision Making – Partners share the decision making and can help each other out when they need to. Limited ownership. family member.Capital – Due to the nature of the business. would be created either by default or by intent. Taxation – One of the major disadvantages of partnership. Industrial partner 3. Thus. taxation laws mean that partners must pay tax in the same way as sole traders. Disadvantages of Partnership Disagreements – One of the most obvious disadvantages of partnership is the danger of disagreements between the partners Agreement – Because the partnership is jointly run. such as a partnership. Flexibility – A partnership is generally easier to form. Limited Partnership Based on contribution: 1. which means that each of the partners shares the liability and financial risks of the business. Partnership Association of two or more person who bind themselves to contribute money. Profit Sharing – Partners share the profits equally. This will allow them to make the most of their abilities. it is necessary that all the partners agree with things that are being done. Capitalist-industrial partner Advantages of Partnership Shared Responsibility – Partners can share the responsibility of the running of the business. A new business arrangement. such as a spouse. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounters. A sole proprietorship by definition is limited to one person. General Partnership 2. The owner is personally liable for any obligations of the business. Capitalist partner 2. the partners will fund the business with start up capital. if the owner wants to admit another owner. Disadvantages of a Sole Proprietorship Liability. or industry common fund with the intention of dividing the profit among themselves Classification Partnership Based on liability of partners obligation 1. manage and run. the sole proprietorship would have to end. This can lead to inconsistency where one or more partners aren’t putting a fair share of . each submitting a Self Assessment tax return each year. or friend.

Domestic corporation b. Parent corporation b. withdrawal. Pre-emptive Right of Stockholders Refers to his right to subscribe to all issues or disposition of shares of any class. As to whether they are open to the public or not a. Shareholders -natural or juridical person owning at least one share capital of a corporation Classification of Corporations By Laws 1. Its juridical personality begin to exist from the date of issuance of Certificate of Incorporation by the SEC under its official seal The Right of Succession A corporation has the right to continuous existence irrespective of the death. Subsidiary corporation 4. Private corporation 3. Corporations A corporation is an artificial body created by operation of law having the right of succession and powers. or incapacity of the individual members or stockholders and regardless of the transfer of their interest or shares of stock 5. Stock corporation b. insolvency. attributes and properties expressly authorized by law or incident to its existence. in proportion to his shareholdings. but still reaping the rewards. Non-stock corporation 2. Open corporation Components of Corporation Corporators -This term refers to all the persons composing a corporation whether they are stockholders or members Incorporators -refers to corporators mentioned in the articles of incorporation as originally forming and composing the corporation and who executed and signed the articles of incorporation as such Member -They are the corporators in a nonstock corp. Public corporation b. Voting in a Stock Corporation The manner of voting in a stock corporation is called cumulative .effort into the running or management of the business. Based on whether they are for public or private purpose a. Close corporation b. As to their relation to another corporation a. Based on nature of its capital a. As to the state or country under whose laws they have been created a. Foreign corporation Defined as the rules of action for the internal government of a corporation and for the government of its officers and stockholders or members.

1993 payable on June 5 1993. Class A and Class B Shares set at April 24 3. they are called ex-dividend. the board of directors declared a 10% cash dividend on its capital stock (par value – 100pesos) to stockholders on records as of May 1. of shares to ensure election: Cum-dividend stocks command higher prices as compared to ex-dividend stocks Cut-off date -refers to the actual date up to which stockholders are entitled to dividends after providing for the time lag required by stock and transfer offices Date of payment . Common Stock and Preferred Stock record so the the real cut-off date has been 2. From the date of declaration to the date of record . A stockholder is entitled to cast votes equal to the number of shares he owns multiplied by the number of directors. Number of shares to ensure Election to the Board of Directors No. Founders share Dividends. Cum-Dividend and ExDividend Stocks Summary: April 1 is the date of declaration May 1 date of record Date of record April 24 cut-off date . The stock and transfer office requires seven Classes of Shares days as allowance for the updating of its 1. the stock are called to the date the stockholders are paid the dividends Voting in a non-stock corp Every member of a non-stock corp may cast votes as there are trustees to be elected but may not cast more than one vote for one candidate unless cumulative voting is authorize in articles of incorporation Example: On April 1993.refers to the date as which. After this date. stockholders June 5 date of payment who appear on record are entitled of dividend. Summary: April 1 is the date of declaration May 1 date of record April 24 cut-off date .

1992. it is called ex-dividend From April 1 to April 23. the stock is .June 5 date of payment called cum dividend. Thereafter.