Corporate Finance and Governance
Why is corporate finance important to all managers?
Corporate finance is crucial to all organizations and their managers because it allows them to forecast future financial needs to fund various proposed projects. Further, corporate finance helps the organization establish the appropriate ways of raising the finances to fund the projects.
Describe the organizational forms a company might have as it evolves from
As an organization evolves from a start-up to a major corporation, it can take three forms. The three forms include sole proprietorship, partnerships, and corporation (Vernimmen et al., 2022). The exclusive proprietorship form entails a start-up business registered under a single person. The business is advantageous because it requires minimal capital to form, few legal requirements are involved, and the owner takes all profits from the company. However, it has various limitations, such as limited access to financing and limited liability, and the owner bears them all alone in case of risks and losses.
Conversely, a partnership is a business owned by a combination of two or more partners. The business form is advantageous because of minimal compliance and registration requirements and involvement in its formation, and in case of risks and losses, partners share them. However, the business form has limited liabilities for the partners. Finally, a corporation is a registered legal entity that can sue or be sued as a person. The business form benefits owners’ limited liability and numerous financing options. However, a corporation requires significant capital to form with a tedious and lengthy registration process.
How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
Corporations go public by selling and registering with the registrar of companies as public limited companies, and they can sell the shares to the general public. Agency problems in organizations are conflicts between owners and managers because of interests in the company (Gillan et al., 2021). Corporate governance is the system through which corporations are controlled and governed, such as through the board of directors.
What should be the primary objective of managers?
The primary objective of managers is to maximize wealth for stockholders. Organizations are responsible for playing to the society at large because their activities can influence society. For instance, organizations are accountable for producing safe products and services and caring for the general environment. Finally, firms should always ensure their behaviour remains ethical because that is the right way to survive and operate. They win the public’s trust in their products and services when they run ethically.
References
Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889.
Vernimmen, P., Quiry, P., & Le Fur, Y. (2022). Corporate finance: theory and practice. John Wiley & Sons.
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Question 
This assignment aims to explain core concepts related to the U.S. financial system.
Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle DellaTorre, a professional tennis player from Chile who has just come to the United States. Della Torre is a highly-ranked tennis player who wants to start a company to produce and market the apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer. Della Torre is very bright and would like to understand in general terms what will happen to her money. Your boss has developed the following questions you must answer to explain the U.S. financial system to DellaTorre.
Corporate Finance and Governance
- Why is corporate finance important to all managers?
- Describe a company’s organizational forms as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
- How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
- What should be the primary objective of managers?
- Do firms have any responsibilities to society at large?
- Is stock price maximization good or bad for society?
- Should firms behave ethically?