Fin515 Homework 1 Essay

1572 Words7 Pages
A. Why is corporate finance important to all managers? Corporate finance is important to all managers because it give management a view into strategic financial issues which may prevent the company from reaching its goals. These goals include how the company should raise and manage its capital, what investments if any can the company make, what portion of the profits should be returned to its shareholders, and whether it makes sense to expand the business through acquisition. 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. The different organizational forms that a company can assume are as follows: 1. Sole proprietorship – usually a small business owned by an individual 2. Partnership – usually a small business with more than one principal owner. 3. Corporation – a legal entity created by a state that is able to conduct business distinctly from its principals. C. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? There are different methods to go public and continue to grow a business: 1. IPO – or Initial Public Offering. This is a company’s initial sale of its stock in the hopes of raising more money to be able to grow the business. 2. Small corporate offerings 3. ACE-Net – or Angel Capital Network. This service is for startups hoping to partner with angel investors that would like to take stock in a company in hopes that the value of that stock soars if it was ever to go public. Agency problems – a conflict of interest arising between management, its shareholders and its creditors. Corporate governance – a set of processes that aid in the way a company is managed D. What should be the primary objective of managers? The primary objective
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