Retained Earnings/Business Organization

Retained Earnings/Business Organization Assignment

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Suppose Care-4-You Hospital has two million dollars of net income remaining at the end of 201x. The financial managers must decide whether to retain all the earnings or pay a dividend to stockholders.

1. If the financial managers pay dividends to stockholders in the amount of one million dollars (half of the net income amount), what effect does this have on the statement of retained earnings? What account(s) would be affected? (4 points)

2. Discuss the advantages or disadvantages of retaining the money in the business versus paying a dividend to the stockholders. (5 points)

3. Suppose you are a financial manager at Care-4-You Hospital. You discover that a new piece of equipment costing $1 million would allow the hospital to expand its services. In two years, the hospital would recover all initial costs of the machine. As the financial manager, would you recommend purchasing the equipment? Why or why not? What impact does your decision have on the hospital, the stockholders and other users of financial information? (8 points)

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For a would-be entrepreneur, selecting the proper form of business organization is a very important first step in the process. After some consideration and an assessment of your skills and education, you have decided to start a medical billing service that will provide services to providers in the local geographical area. Ideally, you would like to service physicians, dentists and hospitals.

1. Determine which of the three forms of business organization (sole proprietorship, partnership or corporation) would be the most appropriate for your new business. Why did you select the form of business organization that you chose? Identify at least three things that should be taken into consideration when making this selection. (4 points)

1. Based on the form of business organization that you selected, answer the following questions:

1. How easy or difficult is it to set up this form of business organization? (4 points)

1. What type of liability do you have in this form of business organization? (4 points)

1. What tax implications do you need to consider for this form of business organization? (4 points)

1. What will happen to the business if something happens to you, the business owner? (4 points)

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