Week 3,4 The Business, Tax, and Financial Environments

After studying Chapter 2, you should be able to:

 Describe the four basic forms of business organization in the United States – and the advantages and disadvantages of each.

Understand how to find a corporation’s taxable income and how to determine the corporate tax rate – both average and marginal.

 Understand various methods of depreciation.

Explain why acquiring assets through the use of debt financing offers a tax advantage over both common and preferred stock financing.

Describe the purpose and makeup of financial markets.

Demonstrate an understanding of how letter ratings of the major rating agencies help you to judge a security’s default risk.

l Understand what is meant by the “term structure of interest rates” and relate it to a “yield curve.”

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