Pgs 19-20 #1-7, 10, 14
1. The three types of financial management decisions are capital budgeting, capital structure, and working capital management. Capital budgeting is the process of planning and managing a firms long-term investments and an example of this would be an education. Capital structure is the mixture of debt and equity maintained by a firm and an example would be partnering with a venture capitalist, by selling a percentage of the company to receive funding for these long term investments. Working capital management is a firms short-term assets and liabilities or how the firm funds its everyday to day activities, and an example would be a firm paying ...view middle of the document...
The treasurer is the focus of corporate finance because the treasurer is responsible for managing a firm’s cash and credit, its financial planning, and its capital expenditures.
5. The goal of a financial manager in a corporation would be to maximize the current value per share of the existing stock. The goal of a financial manager for a business that isn’t a corporation would be to maximize the market value of the existing owners’ equity.
6. The Shareholder/owners of the company elect a qualified CEO to act as an agent in their behalf to make decisions regarding the company’s future. An agency relationship exists because the board of directors would not be able to effectively make these tough decisions, and just as the US public elects a qualified president on their behalf to make the decisions, the board of directors elects a qualified CEO. In context an agency problem can arise meaning the CEO could be acting on his own behalf rather than the behalf of the people he is representing.
7. An Initial Public Offering is Primary market...