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Corporate finance has 3 main areas of concern
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Corporate finance has 3 main areas of concern

1. Capital budgeting

2. Capital structure

3. Working capital management

Goal of financial management in a for-profit business

Advantages/disadvantages of corporate form of organization

Agency problems

Advantages of the corporate form enhanced by?

2 parts of Balance Sheet Model of the Firm

1. Total Value of Assets

2. Total Firm Value to Investors

The Financial Manager's primary goal is to increase the value of the firm by:

 

3 Forms of Business Organization

Importance of cash flow

What is the goal of financial management?

2 steps of Agency Relationship

Agency problem

Managerial goals

Managerial compensation

Incentives

Corporate control

Other stakeholders

Regulation

Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?

Suppose you were the financial manager of a not-for-profit business. WHat kinds of goals do you think would be appropriate?

Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.

Can the goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior? In particular, do you think subjects like customer and employee safety, the environment, and the general good of society fit in this framework, or are they essentially ignored? Think of some specific scenarios to illustrate your answer.

Why is the goal of financial management to maximize the current share price of the company's stock? In other words, why isn't the goal to maximize the future share price?

Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding stock. Your company's management immediately begins fighting off this hostile bid. Is management acting in the shareholders' best interests? Why or why not?

 

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