Business > EXAM > Advanced Corporate Finance Chapter 1, 4, 8, 9, 5, 6, 10, 11, & 13 questions and answers(2023) (All)

Advanced Corporate Finance Chapter 1, 4, 8, 9, 5, 6, 10, 11, & 13 questions and answers(2023)

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Goal of a Firm o The goal of financial management in a for-profit business is to make decisions that increase the value of the stock, or, more generally, increase the value of the equity o Possible f... inancial goals would be to survive, avoid financial distress and bankruptcy, beat the competition, maximize sales or market share, minimize costs, maximize profits, and maintain steady earnings growth. o Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits. Capital Budgeting o The decision-making process for accepting or rejecting projects. o What long-lived assets should the firm invest in? This question concerns the left side of the balance sheet. Financing Capital Structure and Payout policy Capital Structure The mix of the various debt and equity capital maintained by a firm. Where will the firm get the long-term financing to pay for its investments? Also, what mixture of debt and equity should it use to fund operations? This question concerns the right side of the balance sheet. Payout Policy The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. Net Working Capital Management Decisions o How should the firm manage its everyday financial activities? How should short-term operating cash flows be managed? This question concerns the upper portion of the balance sheet. o = Current Assets - Current Liabilities Agency Problem o The relationship between stockholders and management o Such a relationship exists whenever someone (the principal) hires another (the agent) to represent his or her interests. [Show More]

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