Bus 101 Final Review - 11:31:00 Chapter1 .Money. .Ethics....

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Business 101 Final Review 02/05/2009 11:31:00 Chapter 1 Theory of the Firm-  Profit Maximization. Money. Taking one stakeholders  account is a conflict of interest. Stakeholder Theory-  Values for all. Ethics. Takes multiple stakeholders  accounts o Stakeholders-Interests Primary-  Those who are directly affected and can affect the  firm. Market stakeholders vital to the continued growth and  survival of the firm Secondary-  Those who are affected by the firm’s decisions, but  don’t directly engage in economic exchange with the firm. Non- market stakeholders 1. Owners-  Satisfactory return on investments; appreciation of stock value overtime 2. Customers-  fair exchange and value for money spent; products are safe and  reliable 3. Employees-  Stable employment, fair pay, safe work environment.  4. Suppliers- Regulate orders and prompt payment 5. Communities-  Employment for residents, local development, and protect local  environment Role of Government-  To protect the interests of other primary stakeholders as a  secondary stakeholder. Ex.  SEC Consent Decree-  Agreement to stop illegal actions
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Spring Loading-  Granting options to buy additional stock in the company  before positive news is released to the public 1. Owners     Proxy-  Opportunity to vote by Absentee Ballot Fiduciary Responsibility-  Required by law to protect interests of the owners they  represent Stockholders Rights- Right to a share of the profits Right to Receive annual reports of earnings and activities Right to elect the board of directors, vote on mergers, & acquisitions, changes  in by-law; vote on proxy Right to Sell Stock Right to bring suit against the company & officers  Common Stock- Voting  rights, last to receive dividends, 1 share=1 vote, Long  Term Preferred Stock-  More expensive, first and higher dividends, no voting rights, Short  Term Institutional Shareholders-  pensions, mutual funds, insurance companies. Ex. Wall  Street Individual Shareholders-  Directly owned shares of stock issued by companies. Ex.  Main Street Corporate Governance-  Process by which a company is controlled or governed.  Board of Directors is in key control. Review Management.
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Board of Directors-  Plays central role of corporate governance. Elected  group of individuals who have legal duty to establish corporate objectives.  Protect stockholders rights o Inside Directors-  Managers of the company on the board. Only 1/4 o Outside Directors-  Not managers of the company. Make up 3/4.  Regulated by SEC Government Protection of Owners’ Interests Securities Exchange Commission (SEC)- 
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