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Corporate Finance - Coggle Diagram
Corporate
Finance
Multinational versus
Domestic Managerial Finance
Different currency denominations
Economic and legal ramifications
Language differences
Cultural differences
Role of governments
Political risk
Value of the Firm
Stockholders versus
Managers
Shareholder intervention
Managerial compensation
Managerial compensation
Executive stock options
The threat of hostile takeover
Stockholders versus
Creditors
Creditors lend at rates based on
Riskiness of the firm’s existing assets
Expectations concerning the riskiness of future asset additions
The firm’s existing capital structure
Expectations concerning future capital structure changes (amount of
debt)
Stakeholders must be treated fairly
Business Ethics
Company’s attitude and conduct toward its
stakeholders
Ethical behavior requires fair and honest treatment toward all parties
Sarbanes-Oxley Act, 2002
Have a committee of outside directors to oversee audits
Hire an external auditor
Provide information about procedures used to construct financial
statements
Proprietorship/Partnership
Advantages
Easy and inexpensive to form
Subject to few government regulations
Taxed like an individua
Disadvantages
proprietorship is limited to time the creator owns it
Transferring ownership can be difficult
Difficult for proprietorship to obtain large sums of capital
unlimited liability for business deb
Structure of the Firm
The Goals of the
Corporation
Stockholder wealth maximizatio
Managerial incentives to maximize shareholder wealth
Social responsibility
Stock price maximization and social welfare
