ASSIGNMENT 1

1. What is finance? Explain how this field affects all of the activities in which businesses engage.
2. What is the goal of the firm and, therefore, of all managers and employees? Discuss how one
measures achievement of this goal?
3. What is corporate governance? Explain.
4. Define agency problems, and describe how they give rise to agency costs. Explain how a firm’s
corporate governance structure can help avoid agency problems.
5. How can the firm structure management compensation to minimize agency problems? What is
the current view with regard to the execution of many compensation plans?
6. How do market forces—both shareholder activism and the threat of takeover—act to prevent or
minimize the agency problem? What role do institutional investors play in shareholder activism?
7. What is the financial services area of finance? Describe the field of managerial finance.
8. Why is the study of managerial finance important to your professional life regardless of the
specific area of responsibility you may have within the business firm? Why is it important to your
personal life?
9. Describe the roles and the basic relationships among the major parties in a corporation—
stockholders, board of directors, and managers. How are corporate owners rewarded for the risks
they take?
10. Define each of the following terms:
a. Proprietorship; partnership; corporation
b. Limited partnership; limited liability partnership; professional corporation
c. Stockholder wealth maximization
d. Money market; capital market; primary market; secondary market
e. Private markets; public markets; derivatives
f. Investment banker; financial services corporation; financial intermediary
g. Mutual fund; money market fund
11. What is a firm’s fundamental, or intrinsic, value? What might cause a firm’s intrinsic value to be
different than its actual market value?
12. Edmund Enterprises recently made a large investment to upgrade its technology. Although these
improvements won’t have much of an impact on performance in the short run, they are expected
to reduce future costs significantly. What impact will this investment have on Edmund
Enterprises’s earnings per share this year? What impact might this investment have on the
company’s intrinsic value and stock price?
13. Describe the different ways in which capital can be transferred from suppliers of capital to those
who are demanding capital.
14. What are financial intermediaries, and what economic functions do they perform?
15. What is a firm’s intrinsic value? Its current stock price? Is the stock’s “true long-run value” more
closely related to its intrinsic value or its current price. Is it better for a firm’s actual stock price in
the market to be under, over, or equal to its intrinsic value?

Instructions:
a. Answer this question in groups with word & ppt format.
b. Choose your own team leader who’s responsible to the assignments submission and the
excellence of the content of the assignments and the presentation (slides and the ability of
presenting the assignments) in class.
c. Submit this assignment via email by only the team leader group to: ika.pratiwi@president.ac.id
d. Subject email: ex: Group 1 Assignment 1; Group 2 Assignment 1; etc.
e. Submit deadline: Day minus 1 (one) before the class begin at 11.59 p.m.
f. Each groups have to make hard copy. Don’t forget bring your flash disk for your presentation in
ppt.
g. The maximum time of presentation and Q&A for each group: 30 minutes.

Thank you and good luck!