January 5, 2012 FI515 Homework 1 Mini Case Why is corporate finance important to all managers? Corporate finance is the field of finance dealing with financial decisions that business enterprises make and the tools and analysis used to make these decisions. Corporate finance is important to all managers because it help managers learn the necessary skills select the corporate strategies and individual projects that add value to their company. It`s also tool for managers to know how to find funding for their company and what is the best strategy they need to adopt to do so. b.
| Advantage | Disadvantage | Sole proprietorship: | -easily and inexpensively formed-subject to few government regulations-income not subject to corporate taxation | -difficult to obtain capital needed for growth-unlimited personal liability-life of proprietorship limited to life of founder | Partnership: | -easily and inexpensively formed-subject to few government regulations-income not subject to corporate taxation | -difficult to obtain capital needed for growth-unlimited personal liability-life of proprietorship limited to life of founder | Corporation | -unlimited life-easy transferability of ownership interest-limited liability | -corporate earnings may be subject to double taxation- more complex and time- consuming than creating a proprietorship or a partnership | c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? If a corporation continues to grow, it can raise additional funds through an initial public offering (IPO) by selling stock to the public at large. Agency problems occur when the managers of a corporation do what’s in their own interest rather than that of the company.
In order to evaluate the success of those decisions, managers must be able to analyze their decisions and fully understand the impact past decisions will have on the past, present, and future health of the company. The tools to analyze the business in such a manner are found in corporate finance. Thus corporate finance is important to all managers because it provides the necessary tools to evaluate decisions that satisfy every company’s two main goals. Brigham, Ehrhardt. Financial Management: Theory & Practice, 13th Edition.
Mini Case Why is corporate finance important to all managers? Corporate fiancé is the basic component of how business is run. It is necessary to direct funds or products in a company. Corporate finance also helps managers to forecast the funding requirements of their company and the necessary strategies to acquire those funds. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation.
Stakeholders who have similar interests and rights belong to the same stakeholder group. Owners, investors, customers, society, other organizations, and organizational members are the main parts of stakeholders. Owners and investors invest money in companies for financial reasons. Investors will focus on measuring tangible assets and intangible human assets to determine a firm’s value in the economy. Assets that have a physical form: Tangible assets include both fixed assets, such as machinery, buildings, land, and current assets, such as inventory.
In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. b. Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty
As the retailers incur virtually no costs by changing suppliers it is easy for them to play them against each other to get better terms. This negative effect is heightened by high supplier volume. As discount retailers account for a large percentage of their revenue, suppliers don’t have strong negotiating power. Power of Buyers – Low-Medium Purchases are not a large part of total income which
The strategic management process is a philosophical approach to business rather than a simple set of rules (Clayton n.d.) Why Strategic Management Strategic management is the driving force of any organization. It provides the organization and its employees the means to drive the business. Everything the company achieves is all based upon what the organization’s strategic goals are. If for example an organization wishes to reduce its waste, the plan should incorporate specifically how it will reduce waste and set specific goals for the company to achieve in a realistic time frame. Recreation Equipment Inc. (REI) REI’s strategic management process has developed three diversity teams to address diversity in the outdoors, employee diversity, and inclusion.
What must a company excel at? What value addition our customers expect from us? How much value a company generates for its shareholders? How a company can improve and innovate? For further elaboration following elements are used in the balanced scorecard: Financial Perspective Internal Processes Learning and Growth Customer Perspective Strategy Map for Ashton Graduate School: The strategy map specifically provides the information about the strategic direction towards the objectives that are more significant for all the employees of the company to act on it accordingly.
What are the main benefits assumed to flow from a merger or takeover? Why do so many mergers and takeovers fail to deliver improved financial performance? Illustrate your answer with relevant financial case analysis. In a highly competitive environment, many companies find it difficult to increase their market share, and hence have no choice but resort to restructuring, mergers and takeovers. Such decisions are forced to be made as mergers and takeovers encourage the increase of share market dominance, obtain economies of scale and create synergies.