Corporate Financial Management solutions Manual

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Chapter 1

An Overview of Financial Management and

The Financial Environment


1-1 a. A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. In contrast, a corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers.

b. In a limited partnership, limited partners’ liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with the tax advantages of a partnership. A professional corporation (PC), known in some states as a professional association (PA), has most of the benefits of incorporation but the participants are not relieved of professional (malpractice) liability.

c. Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock.

d. A money market is a financial market for debt securities with maturities of less than one year (short-term). The New York money market is the world’s largest. Capital markets are the financial markets for long-term debt and corporate stocks. The New York Stock Exchange is an example of a capital market. Primary markets are the markets in which newly issued securities are sold for the first time. Secondary markets are where securities are resold after initial issue in the primary market. The New York Stock Exchange is a secondary market.

e. In private markets, transactions are worked out directly between two parties and structured in any manner that appeals to them. Bank loans and private placements of debt with insurance companies are examples of private market transactions. In public markets, standardized contracts are traded on organized exchanges. Securities that are issued in public markets, such as common stock and corporate bonds, are ultimately held by a large number of individuals. Private market securities are more tailor-made but less liquid, whereas public market securities are more liquid but subject to greater standardization. Derivatives are claims whose value depends on what happens to the value of some other asset. Futures and options are two important types of derivatives, and their values depend on what happens to the prices of other assets, say IBM stock, Japanese yen, or pork bellies. Therefore, the value of a derivative security is derived from the value of an underlying real asset.

EA Job...

2005-10-02 02:24:27 by poolhousephantom

Prior to that position I worked in a Corporate Communications role for a major Retailer which was just like any other Assistant position - where you are delegated tasks to do which no one else would have the time to do (e.g. like calling up a huge list of clients or completing reports for Managers who fell behind schedule). I mean you technically are working in Internal Marketing Communications, but it doesn't feel like it - it feels like the farthest thing from Marketing.
However, when I moved to a new location I landed this interview with this Financial Software company and because the industry looked like it was so so fun to work in being that the tech boom was well over with and people would slit my throat to get their own feet into the door - I took the position as the...

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