Ch1 homework answer

Ch1 homework answer - publicly traded or not). 6. In the...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 1, CTCR 1. Capital budgeting (deciding on whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt), and working capital management (modifying the firm’s credit collection policy with its customers). 3. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life. 5. To maximize the current market value (share price) of the equity of the firm (whether it’s
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: publicly traded or not). 6. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events occur, they may contradict the goal of maximizing the share price of the equity of the firm. 1...
View Full Document

This note was uploaded on 04/30/2008 for the course BCOR 2200 taught by Professor Tomnelson during the Fall '08 term at Colorado.

Ask a homework question - tutors are online