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Fi515 Homework

In: Business and Management

Submitted By derekabbott
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Mini Case (p. 45) * a. Why is corporate finance important to all managers?
Corporate finance enables managers to choose different ways and choose specific projects that will increase company profitability as well as identify ways to acquire needed funding. With proper management of corporate finances companies are able to maximize their shareholder wealth. * 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.
A company may start out as a sole proprietorship or partnership and work its way towards becoming a corporation. * c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
Agency problems occur when managers act in a way that benefits themselves and acts in ways that are not in the best interests of the stockholders or owners of the company. Corporate governance is the set of rules that are used to direct the company’s actions towards its employees, “shareholders, creditors, customers, competitors, and community” and is a means by which agency problems are addressed (Brigham, Eugene F. . Financial Management: Theory & Practice, 13th Edition. South Western Educational Publishing, 03/2010. p. 8). Corporations go public through an initial public offering (IPO) which is when the company’s stock is sold to the public at large. After an IPO, corporate growth is supported by taking out loans from banks or selling stock. A company’s growth depends on how it does in the financial markets it is involved in.

* d. What should be the primary objective of managers?
The primary objective of managers it shareholder wealth maximization, which means to maximize the profitability which in turn maximizes that stock price of the company. * (1) Do firms have any responsibilities to…...

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