Question

6:58 Back 03.22 chapter 1 pre-class assignment.... Chapter 1 Please handwrite answers of the following questions, take a picture of your handwriting and submit the picture in DingTalk. 1. What is finance? 2. What do we discuss in Financial Management? 3. What is a corporation? 4. What is the real goal of a corporation? 5. What is the agency problem?

Answer 1

As per HOMEWORKLIB RULES, I'm only supposed to answer the first 4 parts of the question:

1. Finance is the systematic study of managing money, making investments and maintaining portfolios at the individual or institutional level. Various branches of finance include corporate finance, which aims to describe and optimize the capital structure of a company, equity investments, which concerns with stock price valuation, fixed income, which is to do with bond valuation, and portfolio management, which concerns with maintaining and rebalancing assets.

2. There are various topics that are discussed in financial management, including capital structure of a firm, the nature of risk and returns of various asset classes and the firm as a whole, the calculation of beta of a portfolio or a single stock, the valuation of stocks, bonds, and other asset classes, and capital budgeting decisions of the firm among other things.

3. A corporation is a group of individuals who come together for business activities and have a separate legal identity as a person. They have to be registered under the laws of the respective country to be recognized as such. A corporation is of various types and can be limited liability companies. This means that the owners of the company are only liable to the hazards of the corporation to a certain extent- usually to that of their equity investment.

4. Historically, corporations used to identify their goal as profit maximization. But in recent times, the real goal of a corporation has transformed to become wealth maximization. This distinction has been made because profits may be erratic over the years and are susceptible to cooked books of accounts and other fraudulent practices. Hence, the goal of a corporation is to maximize and grow the wealth of the shareholders over a period of time. This wealth shall be readily realizable by the shareholders, unlike profits that are paid out at the discretion of management.