a. Why is corporate finance important to all managers? Corporate finance is important to managers because managers of a company must know the finance of a company which is used to help managers to know the health of the company and can act accordingly with a common guideline.
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. Sole Proprietor, Partnership, and Corporation are the three types of companies. With the first it is the owners company solely but are hard to start because of capital. The second is a partnership and two or more people go into start a company assuming all risks equally. Lastly, a corporation has stakeholders who invest in the company to keep them running.
c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? Corporations go public by selling stock to stakeholders and if the company has an interesting product or service it will continue to grow will the shareholders. Agency problems are when companies don’t keep the interests of the stakeholders in mind when making decisions. Corporate governance is the way a corporation protects the interests of its shareholders and other financiers.
d. What should be the primary objective of managers? The primary objective of a finance manager is to maximize the investors wealth.
(1) Do firms have any responsibilities to society at large? Yes companies do have responsibilities (ie. Social responsibilities) and should be taken very seriously because some stakeholders invest in companies by how a company handles these responsibilities.
(2) Is stock price maximization good or bad for society? it probably would be good for society, as there are many share holders who's stakes would increase in value, meaning some would sell shares, thus creating economic activity.
(3) Should firms behave ethically? Firms should...