Chapter 01: The Goals and Functions of Financial Management
Chapter 1
The Goals and Functions of Financial Management
Discussion Questions
1-1.
How did the recession of 2007–2009 compare with other recessions since the
Great Depression in terms of length?
1-2.
What effect did the recession of 2007–2009 have on government regulation?
1-3.
What advantages does a sole proprietorship offer? What is a major drawback of
this type of organization?
1-5.
In a corporation, what group has the ultimate responsibility for protecting and
managing the stockholders' interests?
1-6.
What document is necessary to form a corporation?
Chapter 01: The Goals and Functions of Financial Management
1-7.
What issue does agency theory examine? Why is it important in a public
corporation rather than in a private corporation?
1-8.
Why are institutional investors important in today's business world?
1-9.
Why is profit maximization, by itself, an inappropriate goal? What is meant by the
goal of maximization of shareholder wealth?
Chapter 01: The Goals and Functions of Financial Management
1-10.
When does insider trading occur? What government agency is responsible for
protecting against the unethical practice of insider trading?
1-11.
In terms of the life of the securities offered, what is the difference between money
and capital markets?
1-12.
What is the difference between a primary and a secondary market?
1-13.
Assume you are looking at many companies with equal risk. Which ones will
have the highest stock prices?
Chapter 01: The Goals and Functions of Financial Management
1-14.
What changes can take place under restructuring? In recent times, what group of
investors has often forced restructuring to take place?
1-15.
How did the Sarbanes–Oxley Act impact corporations’ financial reports?