Mini Case (P. 45)

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a. Why is corporate finance important to all managers? Corporate finance is important to all managers because it allows a manager to be able to predict the funds the company will need for their upcoming projects and think about ways to organize and acquire those funds. 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 organizational forms a company might have as it evolves from a start-up to a major corporation are: sole proprietorships, partnerships and corporations. The advantages of a sole proprietorship are that is is easily and inexpensively formed; is subject to few government regulations and it’s income is not…show more content…
Corporate governance can address agency problems, they are the rules that dictate the company’s behavior towards it’s directors, managers, employees, shareholders, creditors, competitors and community. d. What should be the primary objective of managers? The primary objective of the manager is to please the stockholder by maximizing stockholder wealth. (1) Do firms have any responsibilities to society at large? Firms have responsibilities to society at large by not harming the environment (polluting the air or water); producing safe products and providing a safe work environment for it’s employees and the surrounding residents. (2) Is stock price maximization good or bad for society? When the firm is trying to maximize their stock they are trying to develop new products and technology which leads to producing products that the customer (society) needs. (3) Should firms behave ethically? Yes, firms should behave ethically. When a firm behaves ethically then the public will “trust” them, and when a customer trusts a company they will be more likely to purchase their product/service or do business with them. What three aspects of cash flows affect the value of any investment? The three aspects of cash flows that affect the value of any investment are the amount of cash flows, the timing of the cash flows, and the risk involved with the cash flows. f. What are free cash flows? Free cash flows are the cash flows
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