...ABMF3174 BUSINESS FINANCIAL TUTORIAL 1 1. If you bought a share of stock, what would you expect to receive, when would you expect to receive it, and would you be certain that your expectations would be met? A: When you purchase a stock, you expect to receive dividends plus capital gains. Not all stocks pay dividends immediately, but those corporations that do, typically pay dividends quarterly. Capital gains (losses) are received when the stock is sold. Stocks are risky, so you would not be certain that your expectations would be met—as you would if you had purchased a U.S. Treasury security, which offers a guaranteed payment every 6 months plus repayment of the purchase price when the security matures. 2. If most investors expect the same cash flows from Companies A and B but are more confident that A’s cash flow will be close to their expected value, which should have the higher stock price? Explain. A: If investors are more confident that Company A’s cash flows will be closer to their expected value than Company B’s cash flows, then investors will drive the stock price up for Company A. Consequently, Company A will have a higher stock price than Company B. 3. When is a stock said to be in equilibrium? At any given time, would you guess that most stocks are in equilibrium as you defined it? Explain. A: Equilibrium is the situation where the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock. If a stock...
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...EXPANSION AND MERGER 1 1. Explain why government regulation is needed, citing the major reasons for government involvement in a market economy. The consolidation of U.S. industry into increasingly powerful corporations spurred government intervention to protect small businesses and consumers. In 1890, Congress enacted the Sherman Antitrust Act, a law designed to restore competition and free enterprise by breaking up monopolies. In 1906, it passed laws to ensure that food and drugs were correctly labeled and that meat was inspected before being sold. In 1913, the government established a new federal banking system, the Federal Reserve, to regulate the nation's money supply and to place some controls on banking activities. The largest changes in the government's role occurred during the "New Deal," President Franklin D. Roosevelt's response to the Great Depression. During this period in the 1930s, the United States endured the worst business crisis and the highest rate of unemployment in its history. Many Americans concluded that unfettered capitalism had failed. So they looked to government to ease hardships and reduce what appeared to be self-destructive competition. Roosevelt and the Congress enacted a host of new laws that gave government the power to intervene in the economy. Among other things, these laws regulated sales of stock, recognized the right of workers to form unions, set rules for wages and hours, provided cash benefits to the unemployed and retirement...
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...Fin 3400 Corbett Homework chapter 1 1. In 2006, a significant indicator of the U.S. economic decline was: A. a significant drop in interest rates B. a sharp increase in unregulated Ponzi-type security sales C. rising defaults by subprime mortgage borrowers D. a large increase in loan default due to unemployment 2. The financial crisis that started in 2006 was magnified by which of the following: A. Public concern over the war in Afghanistan B. Consistently increasing oil and gas prices C. Ethical issues affecting high value investment D. Mortgage lenders securitizing large quantities of their loans 4. This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes. A. real markets B. investments C. financial management D. none of these 5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings. A. investments B. financial management C. treasury management D. none of these 7. This subarea of finance helps facilitate the capital flows between investors and companies. A. investments B. financial management C. treasury management D. financial institutions and markets 10. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. A. investment B. financial asset ...
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...Running head: LONG-TERM INVESTMENT DECISIONS 1 Long-Term Investment Decisions Juanita Bates Professor: Mohammad Sumadi ECO 550 Managerial Economics and Globalization December 5, 2015 Long-Term Investment Decisions 2 Abstract Microwave food have taken place of the traditional family-styled dining in today’s fast-paced society. There are a variety of microwavable food for consumers to choice from. With today’s health conscious society, the microwave food industry have adapted to meet the preferences of the consumers by producing low calorie frozen microwavable foods. With the growth of this market, it is important that companies in this market have a good marketing plan along with a good strategic business plan. An important long-term decision a business can make is whether or not to invest. The process of evaluating the sustainability of long-term investments with a view of distributing financial resources to investments that are profitable is known as capital budgeting. Capital budgeting focuses on investment costs related to the benefits generated during their economic life. This is one of the most important decisions for a company because it helps with the appraisal and selection of investments that are most feasible. It also helps with the decision of accepting or rejecting investment proposals. Evaluating...
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...stores and online pharmacy, riteaid.com. Due to the breadth and scope of its businesses, the Company faces a wide range of competitive challenges including, but not limited to, other retail drugstore chains, supermarkets, convenience stores, pharmacy benefit managers and other mail order prescription providers, Internet pharmacies and ambulatory care health providers. A primary component of the Company's human resources strategy to ensure high caliber leadership is the identification, recruitment, development and placement of key management and business talent. The Rite Aid Board of Directors (the "Board") and executive management team believe that a crucial aspect of executing this strategy is a comprehensive, integrated and straightforward executive compensation platform that provides competitive and differentiated levels of pay based on corporate and individual performance while reinforcing the alignment of executive interests with those of stockholders. When a company is facing issues dealing with corporate compliance, implementing a system to deal with the compliance and corporate governance issues is the best opportunity for the company. The company should develop a process to analyze alternatives and integrate the appropriate opportunity into the company's system. The company will begin by developing an internal control and corporate governance system. This process includes defining and implementing compliance steps and process. Next, the company will recommend a...
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...International Journal of Business and Management; Vol. 10, No. 1; 2015 ISSN 1833-3850 E-ISSN 1833-8119 Published by Canadian Center of Science and Education The Agency Problem: Measures for Its Overcoming Meri Boshkoska1 1 Faculty Economics-Prilep, Republic of Macedonia Correspondence: Meri Boshkoska, Faculty of Economics-Prilep, Republic of Macedonia. E-mail: meribb@yahoo.com Received: September 19, 2014 Accepted: November 4, 2014 Online Published: December 20, 2014 doi:10.5539/ijbm.v10n1p204 URL: http://dx.doi.org/10.5539/ijbm.v10n1p204 Abstract As the corporative company type emerged, the two functions of ownership and management are separated. In the companies with a large number of employees the managers are the ones that manage the capital in the best interest of the shareholders. In this type of companies, conflict of interest may occur between the managers and the shareholders. Having more information about the work of the company, managers may use it in making decisions for their own benefit, which on the other hand cannot be as beneficial for the shareholders. Conflict of interest between managers and shareholders leads to so-called agency problem. There are different ways by which shareholders can control the operations of management. Some of the measures that can be used to resolve and prevent this problem are subject of analysis in this paper. Keywords: management, ownership, shareholders, conflict of interest, asymmetrical information...
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...Chapter 1 An Overview of Financial Management Learning Objectives After reading this chapter, students should be able to: ◆ Explain the role of finance, and the different types of jobs in finance. ◆ Identify the advantages and disadvantages of different forms of business organization. ◆ Explain the links between stock price, intrinsic value, and executive compensation. ◆ Discuss the importance of business ethics and the consequences of unethical behavior. ◆ Identify the potential conflicts that arise within the firm between stockholders and managers and between stockholders and bondholders and discuss the techniques that firms can use to mitigate these potential conflicts. Lecture Suggestions Chapter 1 covers some important concepts, and discussing them in class can be interesting. However, students can read the chapter on their own, so it can be assigned but not covered in class. We spend the first day going over the syllabus and discussing grading and other mechanics relating to the course. To the extent that time permits, we talk about the topics that will be covered in the course and the structure of the book. We also discuss briefly the fact that it is assumed that managers try to maximize stock prices, but that they may have other goals, hence that it is useful to tie executive compensation to stockholder-oriented performance measures. If time permits, we think it’s worthwhile to spend at least a full day on the chapter. If not, we ask students...
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...The relationship between management and shareholders is sometimes referred to as an Agency Relationship, in which managers act as agents for the shareholders, using delegation powers to run the affairs of the company in the best interest of the shareholders. Since the agent and the manager may have different value of the company to perform agency relationship share prices.When a manager hires an agent to carry out specific tasks, the hiring is be called principal agent relationship, or simply an agency relationship. When a conflict of interest between the needs of the principal and those of the agent arises, the conflict is called an agency problem.In financial markets, agency problems occur between the stockholders and corporate managers .While the stockholders call on the managers to take care of the company, the managers may look to their own needs first. It should be stressed that most severe conflict of interest exists between shareholders and managers . This situation exists despite the rights of shareholders to manage the company by participating and they may also sell the shares that they own and put their company at risk of being taken over, For example, if managers hold none or very little equity shares of the company they work for, what is to stop them from working inefficiently, not bothering to look for profitable new investments opportunities, or giving themselves high salary or perks and managers avoid problems stemming from reductions in employment levels...
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...1950’s. The meal tray was heated in the oven and consisted of a small portion of meat, two vegetables and dessert. The top two competing manufacturers of microwavable low-calorie foods are Lean Cuisine owned by Nestle and Healthy Choice owned by ConAgra. Both leaders in the frozen food market began in the 80’s. Healthy Choice works rigorously with the FDA to assure foods qualify under government health standards for healthy low calorie foods. Like all businesses these two businesses need a financial business plan that allows them to assess the company’s results and set targets for future growth. Marketing is a vital part of the business plan. Healthy low calorie microwave food as a health option is a concept which has gained enormous interest. The previous assignment discussed the background and the introduction of the company which caters to this segment. The purpose of this paper is to discuss the long term capital budgeting decisions that a company needs to make to determine the market structure operates in and to provide a framework to represent how market makes long term decision. One of the most important long...
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...cope published an HBR article with the as they struggle through it deceptively mild title "Managers and Leaders: Are They Different?" The piece caused an uproar in business schools. It argued that the theoreticians of scientific management, with their organizational diagrams and time-and-motion studies, were missing half the picture-the half filled with inspiration, vision, and the full spectrum of human drives and desires. The study of leadership hasn't been the same since. "What Leaders Really Do" first published im99O, deepens and extends the insights ofthe 1977 article. Introducing one of those brand-new ideas that seems obvious once it's expressed, retired Harvard Business School professor John Kotter proposes that management and leadership are different but complementary, and that in a changing world, one cannot function withoutthe other. He then enumerates and contrasts the primary tasks ofthe manager and the leader. His key point bears repeating: Managers promote stability while leaders press for change, and only organizations that embrace both sides of that contradiction can thrive in turbulent times. BREAKTHROUGH LEADERSHIP DECEMBER 2001 by John P. Kotter I EADERSHIP IS DIFFERENT I management, but not for the rea^ ^ sons most people think. Leadership isn't mystical and mysterious. It has nothing to do with having "charisma" or other exotic personality traits. It is not the province of a...
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... 4. Explain why maximizing the current value of the firm’s stock price is the appropriate goal for management. 5. Discuss how agency conflicts affect the goal of maximizing stockholder wealth. 6. Explain why ethics is an appropriate topic in the study of corporate finance. I. Chapter Outline 1.1 The Role of the Financial Manager A. It’s All about Cash Flows • The financial manager is responsible for making decisions that are in the best interest of the firm’s owners. • A firm generates cash flows by selling the goods and services produced by its productive assets and human capital. After meeting its obligations, the firm can pay the remaining cash, called residual cash flows, to the owners as a cash dividend, or it can keep the money and reinvest the cash in the business. • A firm is unprofitable when it fails to generate sufficient cash flows to pay operating expenses, creditors, and taxes. Firms that are unprofitable over time will be forced into bankruptcy by their creditors. In bankruptcy, the company will be reorganized, or the company’s assets will be liquidated, whichever is more valuable. If anything is left after all creditor and tax claims have been satisfied, which usually does not happen, the remaining cash, or residual, is distributed to the owners. B. Three Fundamental Decisions in Financial Management • The capital budgeting decision: Which productive assets should the firm buy? This the...
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...Riordan Corporate Compliance Plan Law 531 Riordan Corporate Compliance Plan In order to minimize risk in today’s changing global business environment applying the legal principles of business management is essential. An effective manage has to quickly and precisely analyze each situation and be able to find the problem and fix it with the best legal solution. Businesses need and manager’s a like need a legal road map that will help them make these important decisions effectively. A good example of this is the legal road map challenges facing Riordan Manufacturing. Riordan is an international plastics manufacturer with 550 employees and $46million in projected annual revenues (University of Phoenix, 2012). Riordan which was founded in 1991 by Dr. Riordan with patent awards prom processing polymers into strong plastic substrates has seen substantial growth since its beginning. The company’s main focus is on manufacturing and selling plastic beverage bottles, custom plastic parts, and plastic fan parts. Riordan is now a global competitor in the plastics market and its projected annual earnings are expected to be around $46 million. Riordan recently made a decision to move its operations from Hangzhou to Shanghai within five years. This move will help facilitate Riordan Manufacturing and Riordan Industries with important strategic changes in their legal context. The following will analyze the legal environment containing opportunities and challenges that Riordan faces in the...
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...are not competent to solve moral problems – should be left to governemtn Director/Officer “Duty of Due Care Standard” in the Business Judgment Rule Statutory duty to act: 1. “In Good Faith” – NO SELF INTEREST 2. “With Care of an ordinarly prudent person” BE INFORMED 3. “In manner reasonably believed to be in best interest of corporation” Comparison to a Professional’s “Duty of Due Care”: 1. Duty of Care 2. Breach of duty of care by a reasonably prudent professional 3. breach causes damages that were foreseeable. 4. Negligence Theory: , Can negligence be criminal—US v Parks case Yes! If informed of an issue, should follow through and ensure action was taken (supermarket example) States’ Differing Public Policy on role of stakeholders in making a decision that is in the best interests of the company * Half of the states say the officers and directors can take into account stockholders and other stakeholders (employees, customers, supplies, communities). * Pennsylvania and Indiana allow officers to place the interests of stakeholders above stockholders Why most companies choose Delaware to incorporate Management friendly. Example: business judgement rule Drucker’s Aristotelian statement--aligning a company’s competencies with societal problem “Organizations have a responsibility to try to find an approach to basic social problems which fits their competence and which, indeed, makes the social problem...
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...heliostats. The objective is to discover how the performance evaluation helps organization and employees towards achieving personal and organizational goals. The analysis of the corporate`s financial performance all year round will assist the organization to locate its internal strength and weaknesses and the steps to increase its productivity. The aspect of financial evaluation serves as a foundation of aligning the company` s financial performance with the goals and objectives of the company. Financial performance evaluation is a major function of the finance officer who assists the company to discover the points that needs improvement to increase the company`s competence and productivity. The scope of this analysis extends to the observation of the extent of evaluation results to assist in improving the performance in more efficient manner. Financial Management This is the organizing, planning, controlling, and directing the financial activities such as utilization and procurement of the funds and finances of the enterprise. It implies the general management principles to locate the financial resources of the company. It involves making of investment decisions in current assets...
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...ethics enhances and facilitates an approach that helps in the protection of the long-term success of both the environment and organisational success (Benn & Bolton, 2011). Social responsibility Social responsibility on a personal or corporate level means having a passionate commitment to act in an ethical and sensitive manner to alleviate poverty from society without destroying the cultural values and environmental settings of the community, and ensuring economic benefits to the organisation that supports the society (Goldengate Consulting, 2012). In my view, social responsibility cuts across the ‘Triple-Bottom-Line (People, Planet, and Profit)’ Wirtenberg (2012, p. 1) concept; ensuring people, planet, and profit are ingrained into management programmes. The social responsibility framework must be geared towards the betterment of people's economic lives, the protection of the...
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