财务管理专业英语unit2_PPT课件.pptVIP

Accounting English 2.2 Corporate Structure of the Company 2.3 Objectives of Financial Management So far we have sees that managers are primarily concerned with long-term investment and financing decisions as well as working capital management decisions within a firm .To make effective decisions, the financial manager needs a clear objective or goal to serve as a standard or a criterion. What’s the objection of financial management? Stakeholder Theory Managers should make decisions that take into account the interests of all of a firm’s stakeholders. Value or Wealth Maximization To maximize long-term firm value or wealth. Maximization of shareholder wealth focuses only on stockholders whereas maximization of firm value encompasses all financial claimholders including common stockholders, debt holders, and preferred stockholders. Separation of Ownership and Control The entity which owns the company (shareholders) is often not the one that controls the company’s resources (management) 2.4 Separation of Ownership and Control Why? Professional managers’ superior ability To grow to an optimal size in terms of business efficiency Efficient diversification’s need The “learning curve” or “going concern” effect The reason or the advantage Separation of Ownership and Control agency problem free-riding problem increased costs of information gathering. information asymmetry Four major downsides Agency problem ? Managers may waste corporate cash and resources by engaging in negative net present value (NPV) acquisitions or investments to satisfy their desire to build an empire. ? Less ominous, but no less costly, managers may squander corporate funds on excessively lavish corporate offices and jets. ? More recently managers have been known to increase share prices (not value) by using “creative accounting”, so as to exercise their stock options (e.g. Enron). 2.5 Agency Relationships Agency costs are the total costs resulting from the agency problem. ma