Investors always buy at the ask and sell at the bid. Since ask prices always exceed bid prices, investors "lose" this difference. It is one of the transaction costs. Since the market makers take the other side of the trade, they make this difference.
  • What is the most important type of decision that the financial manager makes?
  • Explain the difference between an S and a C corporation
  • What is the difference b/w a public and private corporation?
  • Explain why the bid-ask spread is a transaction cost.
-Limited partnership for limited partners -Corporation
  • What are the main disadvantages of organizing a firm as a corporation?
  • What are the main advantages of organizing a firm as a corporation?
  • Which organizational forms give their owners limited liability?
  • What does the phrase limited liability mean in a corporate context?
-In the financial cycle, money flows from savers and investors to companies who use that money to fund groweth through new products -Financial institution connect the money with ideas and assist in returning the profits back to the investors -In the financial cycle, companies generate profits and wages and interest which then flow back to the savers and investors
  • What are the main disadvantages of organizing a firm as a corporation?
  • What is the financial cycle?
  • What is the most important type of decision that the financial manager makes?
  • What is the difference between a primary and a secondary market?
Owners' liability IS limited to the amount they invested in the firm. Stockholders ARE NOT responsible for any encumbrances of the firm; in particular, they CANNOT be required to pay back any debts incurred by the firm
  • What does the phrase limited liability mean in a corporate context?
  • What are the main disadvantages of organizing a firm as a corporation?
  • What is the difference b/w a public and private corporation?
  • What are the main advantages of organizing a firm as a corporation?
-Investing decisions is the most important b/c a manager must decide how to maximize the wealth of shareholders by putting their money to best use. They determine the cost and benefits of each transaction/decision. -Financing is also important because they must raise funds for these investments.
  • What are the main advantages of organizing a firm as a corporation?
  • What is the most important difference between a corporation and all other organizational forms?
  • What are the main disadvantages of organizing a firm as a corporation?
  • What is the most important type of decision that the financial manager makes?
-There is no limited on the number of owners a corporation may have, thus allowing the corporation to raise substantial amounts of capital -the life of the business can continue beyond the death of any of the owners-the liability of the owners is limited to the amount of their investment in the firm
  • What are the main advantages of organizing a firm as a corporation?
  • What does the phrase limited liability mean in a corporate context?
  • What is the difference between a primary and a secondary market?
  • What are the main disadvantages of organizing a firm as a corporation?
-Move funds from savers to borrowers -Move funds through time -Help spread out risk-bearing
  • What role do investment banks play in the economy?
  • What is the financial cycle?
  • Roles of Financial Institutions
  • How do financial institutions help with risk-bearing?
The primary market refers to a corporation issuing new shares of stock and selling them to investors. After this initial transaction between the corporation and investors, the shares continues to trade in a secondary market between investors without the involvement of the corporation.
  • What is the difference between a primary and a secondary market?
  • Explain the difference between an S and a C corporation
  • What is the difference b/w a public and private corporation?
  • What are the main advantages of organizing a firm as a corporation?
The shares of a PUBLIC corporation are traded on an exchange (or "over the counter" in an electronic trading system) while the shares of a PRIVATE corporation are not traded on a public exchange
  • What is the most important difference between a corporation and all other organizational forms?
  • What is the difference between a primary and a secondary market?
  • What is the difference b/w a public and private corporation?
  • What does the phrase limited liability mean in a corporate context?
An important difference among the types of corporate organizational forms is the way they are taxed. Shareholders of a corporation pay taxes twice.This system is sometime referred to as double taxation.
  • What is the most important difference between a corporation and all other organizational forms?
  • What is the most important type of decision that the financial manager makes?
  • What is the difference b/w a public and private corporation?
  • What are the main disadvantages of organizing a firm as a corporation?
-Income to a corporation is subject to double taxation, once at the corporate level and again when received by the owners in the form of a dividend-the corporation is more complicated and more expensive to set up than other business entities
  • What are the main advantages of organizing a firm as a corporation?
  • What is the most important type of decision that the financial manager makes?
  • What are the main disadvantages of organizing a firm as a corporation?
  • What does the phrase limited liability mean in a corporate context?
-Mutual funds, pension funds, and hedge funds are all financial institutions involved with helping savers and investors reach their financial goals-Unlike mutual funds and pension funds which serve investors of all means, hedge funds are primarily designed for wealthy investors and endowments-Pension funds, which are similar to mutual funds in that they buy stocks, bonds and other financial instruments on behalf of its investors, is primarily concerned with providing retirement income. Mutual funds allow investments to be accumlated and withdrawn for a variety of financial goals
  • What are the main disadvantages of organizing a firm as a corporation?
  • What are some of the similarities and differences among mutual funds, pension funds, and hedge funds?
  • What is the most important difference between a corporation and all other organizational forms?
  • What are the main advantages of organizing a firm as a corporation?
- financial institutions not only assist with the risk bearing of savers and investors but must aalso be oncerned about their own risk, spreading their loans out among a variety of clientele- mutual funds and pension funds take your savings and spread them out among the stocks and bonds of many different companies, limiting your exposure to any one company- ins. companies spread out risk by pooling premiums together from policy holders and pay the claims of those who have an accident, fire, medical need or die
  • What role do investment banks play in the economy?
  • Explain the difference between an S and a C corporation
  • How do financial institutions help with risk-bearing?
  • Why do all shareholders agree on the same goal for the financial manager?
There is an ethical dilemma when the CEO of a firm has incentives that are opposite to those of the shareholders.In this case, you (as the CEO) have an incentive to potentially overpay for another company (which would be damaging to your shareholders) because your pay and prestige will improve.
  • What are the main advantages of organizing a firm as a corporation?
  • You are a shareholder in an C corporation. The corporation earns $2.35 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 40% and the personal tax rate is 20%. How much is left for you after all taxes are paid?
  • Your are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here and how is it related to ethical considerations?
  • Corporate managers work for the owners of the corporation. Consequently, they should Corporate managers work for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than in their own interests. What strategies are available to shareholders to help ensure that managers are motivated to act this way?
Amount that remains = Price per share - (Price per share X tax rate)1.69
  • Your are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here and how is it related to ethical considerations?
  • You are a shareholder in an C corporation. The corporation earns $2.35 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 40% and the personal tax rate is 20%. How much is left for you after all taxes are paid?
  • You are a shareholder in an S corporation. The corporation earns $2.35 per share before taxes. As a pass through entity, you will receive @2.35 for each share that you own. Your marginal tax rate is 28%. How much per share is left for you after all taxes are paid?
  • Corporate managers work for the owners of the corporation. Consequently, they should Corporate managers work for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than in their own interests. What strategies are available to shareholders to help ensure that managers are motivated to act this way?
0:0:1



Answered

Not Answered

Not Visited
Correct : 0
Incorrect : 0