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knowledge bank -basic learning Fundamentals

1.If all companies wanted to maximise shareholder wealth would people overall tend to be better or worse off?

2. Compare  the objective of maximizing earnings with that of maximizing wealth.

3. What is Financial Management all about?

4. Is the goal of zero profits for some definite period consistent with the maximization-of-wealth objective?

5. Explain why judging the efficiency of any financial decision requires the existence of a goal.

6. What are the three major functions of a Financial Manager? How are they related?

7. Do you think it is proper for managers of a company own a sizeable amounts of common stock in the company? What are the pros and cons?

8. During the last few decades, a number of environmental, hiring, and other regulations have been imposed on businesses. In view of these regulatory changes, do you think that maximization of shareholder wealth is a realistic objective?

9. As an investor, do you feel that some senior level executives are paid too much? Do their rewards come at your expense?

10. How does the notion of risk and reward govern the behavior of financial managers?

11. What is corporate governance? What role does a corporation’s board of directors play incorporate governance?

12. Compare and contrast the roles that a firm’s treasurer and controller have in the opera-tion of the firm.

13. What is the principal advantage of the corporate form of business organization? Discuss the importance of this advantage to the owner of a small family restaurant. Discuss the importance of this advantage to a wealthy entrepreneur who owns several businesses

14. How does being a limited partner in a business enterprise differ from being a shareholder, assuming the same percentage of ownership?

15. What are some of the disadvantages of (a)a sole proprietorship ?(b) a partnership? Companies?

16. If capital gains were to be taxed at a lower rate than ordinary income ,as has been the case in the past, what type of investment would be favoured?

17. The method of depreciation does not alter the total amount deducted from Income during the life of an asset . What does it alter and why is it important?

18. What is the purpose of financial markets ? How can this purpose be accomplished efficiently?

19. Discuss the functions of financial intemediaries?

20. A number of factors give rise to different interest rates and yields being observed for different type of debt instruments. What are these factors?

21. What is meant by making the financial markets more efficient? More complete?

22. What is the purpose of stock market exchanges?

23. In general, what would be the likely effect of the following occurrences on the money and capital markets?

               a.         The savings rate of individuals in the country declines.

b.         The government taxes capital gains at the ordinary                  income tax rate.

c.         Unanticipated inflation of substantial magnitude occurs, and price levels rise rapidly.

d.         Savings institutions and lenders increase transaction charges for savings and for making loans.

24.What is the distinction between money market and capital market ? Is the distinction real or artificial?

24. How do transaction costs affect the flow of funds and the efficiency of financial markets?

25. What are the major sources of external financing for business firms?

26. In addition to financial intermediaries what other institutions and arrangements facilitate the flow of funds to and from business firms?


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