Question

Please answer the following questions based on your own understandings: (1) How many types of decisions one corporation needs to make? Could you please show two examples for each type? (2) What are the functions of financial managers? Ideally, could one person both be a controller and a treasurer? Why? (3) What is agency cost? How could we reduce this cost? Please show at least two ways and illustrate how they work in detail. (4) What is the goal of the corporation? Is it desirable for managers to act in the narrow, selfish interest of their shareholders?

Answer 1

are one to make ; But there are decisions that every are in (1) There many types of decisions corporation needs 3 major Corporation should make. They a) Corporate decisions, 6) functional decisions. c) Operational densions. Examples: - a) Corporate decisions Ex: Making Vision & Mission statements, Setting goals & objective. b) Functional decisions Divisional transfer pricing; Making goal Congruence decisions. e) operational decisions : Exr Regulating trade unions; Maintenance of machine time, labour hers, idle time etc.

a) Determining financial requirements. manager :- (2) functions of financial Banks One Could be a treasmer shall are Costs borne by shareholders to to maximise b) Setting capital structure. c) preparing a budget of cash flows. d) Maintaing Books of Alc's. e) Interacting with to raise loans. Yes both treasurer & Controller. financial manager look after Book - keeping aspects as well finance department. So; as a controllen he/she would look after accounting department & ar look after finance department. 3) These prevent agency problem as owners wealth. It is incurred because of conflict between Share holders & managers. Agency costs can be reduced by : - Managerial compensation. - Direct Intervention by large stake holder. - Threat of firing. - Threat of take over. By given compensations, the settlement is being done reduce conflicts. terms in monetary Any problem can be solved easily, when there is a direct intervention. 1- to

(4) Goal of corporation Can Can be to be set by own con or else by observing peen competitors. & Benchmarking done set goals of corporation. - Always, decision makers should take a think in wider mannen. But when they narrow minded, they would be focoused my opione; diplomatic answerd (ie) at formulation in managers should consider wider opportunities & at implementation managers should focus on implementation of those strategies. In it will be