公司金融期末复习

公司金融期末复习

Problem:

1.Function of financial market and list some financial intermediarie

Answer1:

A.contributing to higher production and efficiency in the economy

B.Improving the well-being of consumers by allowing them to their purchases better Answer2:

(1) facilitate investment and financing.

(2) a reasonable guidance of capital flow, which contributes to the concentration of capital and promotes the transfer of high-efficiency units.

(3) convenient and flexible turnover of funds.

(4) to achieve risk diversification, reduce transaction costs. (5) are conducive to enhancing the flexibility of macro-control. (6) to help strengthen economic ties between regions and countries. Intermediaries: Banks

Building societies Credit unions

Financial advisers or brokers Insurance companies

Collective investment schemes Pension funds

2.Why profit maximization is not an ideal corporate finance objective?

(1)The primary goal of corporate finance is maximize or increase shareholder value not profit

(2)To a skilled accountant, however, a decision that increases profits under one set of accounting rules can reduce it under another.

(3)Accounting profits are not necessarily the same as cash flows.

(4)The problem with profit maximization as a goal is that it does not tell us when cash flows are to be received.

(5)Profit maximization ignores the uncertainty or risk associated with cash flows.

总：For the fact that a firm cannot survive with mere profit

maximization ,but must increase long-term security through investment and meeting shareholder expectations. This will increase their productive capacity for the future as well as encourage the risky capital investment of the shareholders.

3.Characteristics of business organization:

(1)sole proprietorship: A business owned and managed by a single individual. Features: Cheapest to form. no formal charter, few government regulations Pays no corporate income taxes

Unlimited liability for business debts and obligations. Its life is

limited by the life of the sole proprietor

The money raised is limited by the proprietor’s personal wealth

(2)partnership:A business formed by two or more individuals or entities.

General partnership: All partners share in gains or losses, all have unlimited liability for all partnership debts.

Limited partnership: One or more general partners will run the business and have unlimited liability. The limited partner's liability is limited to their contribution to the partnership. Features: Often inexpensive and easy to form Difficult to transfer ownership

Difficult to raise large amounts of cash Income is taxed as personal income

(3)Corporati on:Is a legal “person” separate and distinct from its owners . Features: Limited liability for stockholders. Unlimited life for the business.

Ownership can be easily transferred.

These characteristics make it easier for corporations to raise capital. The disadvantage to corporations is double taxation.

4.Why separation of ownership and management is necessary and desirable

Professional Managerial Skills:

The growth of a company comes with the demand for different skills to manage the operations of the company, meaning the owners of a company may not