Eng 111 - Week 1 Discussion

Eng 111 - Week 1 Discussion - Discussion Sheet 1 Week 1:...

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Discussion Sheet 1 09/30/2011 Week 1: Introduction to Corporate Finance TA: Ravichandran Ramakrishnan Corporate Finance deals with how businesses make monetary decisions (raising funds, making investment decisions, etc.) Agency Problem occurs when a person or organization (principal) hires another person to represent them (agent.) The agent may not fully represent the principal and act on a conflict of interest. For example your real estate agent may try to make you purchase an expensive house because they get a percentage of the sales price as commission. Example 1: ABC Corporation hires Bill the Banker to help negotiate the purchase of the XYZ Company. Bill owns 10,000 shares in XYZ. Identify the principal and agent and what conflicts of interest might arise? Balance Sheet: Is a snapshot of what a company owns (Assets) and how it’s financed (Liabilities and Equity.) Simplified Balance Sheet Assets Current Assets 50 Fixed Assets 200 Other Assets 30 Total Assets 280 Liabilities Current Liabilities
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Eng 111 - Week 1 Discussion - Discussion Sheet 1 Week 1:...

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