1.

In a large corporation, what are the two distinct groups that report to the chief
financial officer? Which group is the focus of corporate finance?

2. Can our goal of maximizing the value of the equity shares conflict with other goals,
such as avoiding unethical or illegal behavior? In particular, do you think subjects like
customer and employee safety, environment and general good of society fit in this
framework, or are they essentially ignored? Think of some specific scenarios to illustrate
your answer.

3. Would our goal of maximizing the value of the equity shares be different if we were
thinking about financial management in a foreign country? Why or why not?

4. Critics have charge that compensation to top managers in the United States is simply
too high and should be cut back. For example, focusing on large corporations, Ray Irani
of Occidental Petroleum has been one of the best-compensated CEOs in the United
States, earning about $54.4 million in 2007 alone and $550 million over the 2003-2007
period. Are such amounts excessive? In answering, it might be helpful to recognize that
superstar athletes such as Roger Federer, top entertainers such as Justin Bieber and
Manny Pacquiao and many others at the top of their respective fields earn at least as
much, if not a great deal more.

5. Why should effective corporate governance be in place?

6. Distinguish the role of an external auditor from the role of an internal auditor.

7. Distinguish the functions of a controller from the functions of the treasurer.