Methods that shareholders have at their disposal for aligning managers’ goals with their goals.

1- List and briefly describe the three basic areas addressed by a financial manager.

2- What should be the primary goal of the financial manager of a corporation? Why?

3- List and explain the methods that shareholders have at their disposal for aligning managers’ goals with their goals.

4- Stockholders can transfer wealth from bondholders through a variety of actions. Explain how the following actions by shareholders transfer wealth from bondholders:
a. An increase in dividends.
b. A leveraged buyout
c. Acquiring a risky business.

Explain how bondholdeers would protect themselves against these actions.

5- Explain why the income statement is not a good representation of cash flow.

6- Note that in all of our cash flow computations to determine cash flow of the firm, we never include the addition to retained earnings. Why not? Is this an oversight?

7- Interpret, in words, what cash flow of the firm represents by discussing operating cash flow, changes in net working capital, and additions to fixed assets.

8- Why is cash flow management important?

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‏ Answer all 8 questions. Each question equally weighted.

1- List and briefly describe the three basic areas addressed by a financial manager.

2- What should be the primary goal of the financial manager of a corporation? Why?

3- List and explain the methods that shareholders have at their disposal for aligning managers’ goals with their goals.

4- Stockholders can transfer wealth from bondholders through a variety of actions. Explain how the following actions by shareholders transfer wealth from bondholders:
a. An increase in dividends.
b. A leveraged buyout
c. Acquiring a risky business.

Explain how bondholdeers would protect themselves against these actions.

5- Explain why the income statement is not a good representation of cash flow.

6- Note that in all of our cash flow computations to determine cash flow of the firm, we never include the addition to retained earnings. Why not? Is this an oversight?

7- Interpret, in words, what cash flow of the firm represents by discussing operating cash flow, changes in net working capital, and additions to fixed assets.

8- Why is cash flow management important?

Sample Solution

ACED ESSAYS