ASSIGNMENT

FINANCIAL MANAGEMENT

GROUP MEMBERS:
Muniba Jabeen (CF-048)

Eraj Tanveer (CF-56)

Yamna Hussain (CF-067)

Ummiha Subhan (CF-070)

SUBMITTED TO:
Miss. Dania Mansoor
Q1: Why is corporate finance important to all managers?

Ans: Corporate finance is important to all managers because it allows

a manager to be able to predict the funds the company will need for their
upcoming projects and think about ways to organize and acquire those funds .

Q2: Describe the organizational forms a company might have as it evolves

from a start-up to a major corporation. List the advantages and
disadvantages of each form.

Ans: 1- Sole Proprietorship:

Advantages: Ease of formation, few regulations, owner controlled and no

corporate income taxes.

Disadvantages: Limited life, unlimited liability, difficult to raise capital

2- Partnership:

Advantages: Easy setup, more resources, tax advantage and shared control.

Disadvantages: Unlimited liability, difficult to raise capital, responsible for

partners’ debt and decisions.

3- Corporation:

Advantages: Unlimited life, Easy transfer of ownership, limited liability, ease of

raising capital.

Disadvantages: Double taxation, cost of set-up and report filing

Q: 3 How do corporation go public and continue to grow?

Ans: A company goes public when it sells stock to the public in an initial public as
the firm grows, it might issue additional stock or debt.

Q4: What are agency problems?

 Ans: Some of the agency problems arise when there’s a conflict between
shareholders and mangers (managers acting for their own best interests) and
between shareholders and creditors (shareholders make managers maximize
stock prize detrimental to creditors which in long run lowers stock price and
increases debt.

Q5: What should be the primary objective of managers?

ANS:The primary objective of mangers should be stockholder’s wealth maximizati
on which is basically maximizing company’s fundamental or stock price.

Q6: Do firms have any responsibilities to society at large?

ANS: Firms have an ethical responsibility to provide a safe working environment,

to avoid polluting the air or water, and to produce safe products.However, the
most significant cost-increasing actions will have tobe put on a mandatory rather
than a voluntary basis to ensure that the burden falls uniformly on allbusinesses.

Q7: Is stock price maximization good or bad for society?

Ans: Stock price maximization requires efficient, low- cost businesses that

produce high-quality goods and services at the lowest possible cost. In general,
companies that successful increase stock prices also grow and add more
employees, thus benefiting society.

Q8: Should firms behave ethically?

Ans: A business should be ethical in order to attract top talent and unify its

employees under one purpose. It will attract customers, partners, and investors,
and also offer the basis for a corporate culture. Customers
choose businesses based on reputation.

Q9: What three aspects of cash flows affect the value of any investment?

Ans: Following are the three aspects of cash flows that affect the value of any
investment:

1. Unit Sales (current level of sales, expected future growth)

2. After-Tax Operating Margins (remaining competitive but increasing price,
lower cost)
3. Capital requirement (managing inventory, reducing asset requirements.)