Answers for Case Application 1 1. How does Amy’s Ice Cream differ from a publicly held in corporation? The reason why Amy’s Ice Cream differs from a held in corporation is a privately held corporation formed in 1984 with 22 family members and friends as shareholders. _Company members which does not offer or trade its company stock (shares) to the general public on the stock market exchanges, but rather the company’s stock is offered, owned and traded or exchanged privately. _The corporation generally has fewer or less comprehensive reporting requirements for transparency, via annual reports, etc. han do publicly traded companies. _ By not being required to disclose details about their operations and financial outlook, Amy’s Ice Cream is not forced to disclose information that may potentially be valuable to competitors and can avoid the immediate erosion of customer and stakeholder confidence in the event of financial duress. 2. What are some of the particular advantages of corporate ownership for firm such as Amy’s Ice Cream? With corporate ownership, liability is limited to the investors’ personal investment.
If the business should fail, investors stand to lose only the money they have invested. _In addition, corporations have a legal life separate from their founders and owners. Therefore, corporations can, at least theoretically, go on indefinitely. _Shares can be sold and passed on from generation to generation. Corporation also has advantages in raising capital. For example, Amy’s Ice Cream should sell more stock to expand the amount of available funds. The funds could be used to buy more equipment or open more stores.
Lenders are also more willing to grant loan to corporation because of their legal status and continuity. 3. How well do you think Amy’s is working to ensure its continued survival and success? Looking ahead to future growth, what marketing, financial, or other suggestion would you make? _Store theme nights, guerrilla marking promotion for charity, and paper bag job application. _Miller feels that allowing customers to taste the product, getting a feel for the culture of the company, and seeing the people help to bring customers to the ice cream shop. Amy’s Ice Cream invests the advertising budget in doing in charitable events. _ Every years , at different locations, Amy’s hosts a contest called the Trick Olympics, in which employees who are especially skilled in the art of tricks compete against one another. _I think Amy’s Ice Cream is working really well because Miller’s nine ice cream shops sell super premium flavors worth more than $3. 9 million each year. My suggestions are: _ Miller should do both direct advertising as well as indirect advertising – charities. She should also expand the investment in capital by lend from the bank or encourage the investor to spend more money in this potential business. 4. What are some the issues that Amy Miller may have to confront because her 22 investors are family members and friends? The issues that Amy Miller may confront because of her 22 investors are family members and friends is: _ Amy has to take high responsibility as the person who manage all the capital of her family and friends . If the business fail, she may suffer not only the lost of money but also the relationship. Profits are taxed twice. A corporation must pay taxes on its income and investors must pay taxes on their individual shares of the profit. _The reflex of changing the business and management are limited because all the decisions have to pass through Amy family and friends. 5. Should Amy’s Ice Cream become a publicly held corporation? Support your chosen position? Amy’s Ice Cream should become a publicly held corporation, the reason is with this kind of ownership, there will be more funds to raise the company – more money, more benefits. 1st solution is to sell the stock for their staff because they are the main factor that affect the creation and production of corporation . If the value of the corporation is rose, they can get the benefit from their investment . This will also rise the capital and encourage them to work more efficiency . Moreover, this will not effect on the management of Amy first vision. _ Secondly, Amy should help the policies to limit the effect of others investor to keep the management and basic value of company.