Finance

Chapter 1 Corporate Finance and the Financial Manager

occupation 4
What be the main advantages and disadvantages of organizing a firm as a toilet?

Advantages: Limited liability, liquidity, infinite life
Disadvantages: Double taxation, separation of ownership and control


paradox 8
What is the most important type of decision that the financial private instructor makes?

The investment decision is the most important decision that a financial manager makes, as the manager must limit how to put the owners money to its best use.


Problem 10
Corporate managers go a direction for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than their own. What strategies are getable to shareholders to help ensure that managers are motivated to act this way?

Shareholders can do the following.
i.Ensure that employees are paid with society stock and/or stock options.
ii. Ensure that underperforming managers are fired.
iii. frame contracts that ensure that the interests of the managers and shareholders are closely aligned.
iv. Mount hostile takeovers.








Problem 13
You are the CEO of a high society and you are considering enter into an agreement to flip your company buy another company. You gauge the price might be too high, but you testament be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency competitiveness here and how is it related to ethical considerations?

There is an ethical quandary when the CEO of a firm has opposite incentives to those of the shareholders. In this case, you (as the CEO) have an incentive to potentially overpay for another company (which would be damaging to your shareholders) because your pay and prestige will improve.


Problem 14
What is the residual between a public and private corporation?

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