DEFINITION

Mention and describe the legal ways to organize a business. Of these legal forms of organization, which is the most common? Which is the one assumed by the largest businesses? What is this about?

2. Describe the role, and the relationship between the main members of the corporation: (shareholders, board of directors and managers).

How is the risk taken by the owners of the corporation rewarded?

3. Define the following terms:

to. corporation

b. shareholders

c. reduced liability (limited liability)

d. Actions

and. dividends

F. board of directors

g. CEO

4. Explain why corporations face a double taxation problem.

5. Define the following terms:

to. marginal tax rate

b. average tax rate

c. ordinary income

d. capital income

6. Define agency problems, and describe how these increase agency costs. Explain how the corporate governance structure of the company can help avoid agency problems.

7. Can the administrative structure related to the compensation system minimize agency problems? Explain.

8. Distinguish between individual investors and institutional investors.

9. Who is the activist investor?

10. Explain how market forces, the activist investor and the threat of a "takeover" prevent or minimize agency problems. What role do institutional investors play in shareholder activism?

11. Explain how the norms, rules and laws impact the corporate governance of all companies.

12. Explain the Sarbanes-Oxley Act of 2002.