ALDOVINO, ELINET M.

BSMA 3204 – ASSIGNMENT #2

1. The difference between Market and Intrinsic value, market value is the current
price of a company’s stock and intrinsic value is the sum of all the company’s
assets minus its liabilities. There company doesn’t need to invest if the market
value is higher than the intrinsic value. On the other hand, the company does
need to invest when the intrinsic value is higher than the market value.

2. Business organizations has 3 forms : (Sole Proprietorship, Partnership and the

Corporation)

a. Sole Proprietorship is a form of organization wherein there is only one

owner. It is known as the simplest form of organization. Having this kind of
organization is easy to put up and the owner has the full control of his or
her business. On the other hand, if there is an advantage, it also has its
disadvantages wherein it has limited sources for funds.
b. Second form of organization is the partnership wherein there are two or
more persons owning the organization and they contribute capital
according to their agreement. The partnership has a juridical personality
and has its own assets and liabilities to handle. Because they are
partners, they have larger source for funds and its disadvantage is that
there might be some disagreements.
c. Last form of organization is the corporation and has a separate legal
personality from the owner. In Stock Corporation, the share of stock
represents the ownership of the stockholders. The advantage of this is
that it has unlimited life meaning that even though someone from the
corporation leaves or dies, the life of the corporation continues. And the
disadvantage of a corporation is that the stock holder of big corporations
can have less or limited involvement in the operations of the business and
in the decision making of the organization.

3. The 2 types of Financial Market:

First type of financial market is the stock market. This is the most common
type of financial market. It is the collection of exchanges and other venues where
the buying, selling, and issuance of shares of publicly held companies take place.
Commodities like oil, corn, and gold are volatile the reason why companies can
lock in known prices. Many investors also trade commodities for profit and the
reason why there are many investors; the market is open and is welcome for the
public.
Second type of financial market is the bond market wherein participants
can issue new debt, known as the primary market, or buy and sell debt securities
(secondary market). It may include notes, bills and public and private
 expenditures. Its prices tend to fall when stock prices rise. Other types of bonds
market are treasury bonds, corporate bonds and municipal bonds.

4. Capital can be transferred from suppliers of capital to those who are demanding
capital. First way of transferring capital is the direct transfers of business and
selling to its stock. Second is through the investment bank. Lastly, it can also be
transferred via financial intermediaries.