FI515_Homework1_EbonyMoore - Mini Case a. Why is corporate...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Mini Case a. Why is corporate finance important to all managers? Corporate finance provides the skills managers need to identify and select the corporate strategies and individual projects that add value to their firm. It is also important because corporate finance forecasts the funding requirements of their company, and devises strategies for acquiring those funds. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. Sole proprietorship – advantages: ease of formation, subject to few regulations, no corporate income taxes. Disadvantages: Limited life, unlimited liability, difficult to raise capital Partnership – Roughly the same advantages and disadvantages as a sole proprietorship. Corporation – advantages: unlimited life, easy transfer of ownership, limited liability, ease of raising capital. Disadvantages: double taxation, cost of set-up and report filing c. How do corporations go public and continue to grow? A company goes public when it sells stock to the public in an initial public as the firm grows, it might issue additional stock. What are agency problems ? Occurs when managers act in their own interests and not on behalf of owners (stockholders) What is corporate governance? Corporate governance is the set of rules that control a company’s behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community. d. What should be the primary objective of managers? The primary objective should be shareholder wealth maximization. (1) Do firms have any responsibilities to society at large? Yes, shareholders are also members of society (2) Is stock price maximization good or bad for society? Yes, employment growth is higher in firms that try to maximize stock price. On average, employment goes up in firms that make managers into owners. (3) Should firms behave ethically? Yes
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
e. What three aspects of cash flows affect the value of any investment? Amount of cash flows expected by shareholders
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/02/2011 for the course FINANCE 515 taught by Professor Mclean during the Spring '08 term at Keller Graduate School of Management.

Page1 / 6

FI515_Homework1_EbonyMoore - Mini Case a. Why is corporate...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online