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2. How can goal congruence for managers and shareholders be achieved? 3. What are the principal forms of business organizations and what are the advantages

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2. How can goal congruence for managers and shareholders be achieved? 3. What are the principal forms of business organizations and what are the advantages and disadvantages of each? 4. Would the normal rate of return on investment be the same in all industries? Would normal rates of return change over time? Explain. 5. What are the functions and areas of responsibility that fall under the control of the financial manager? 6. What's the difference between stock price maximization and profit maximization? Under what conditions might profit maximization not lead to stock maximization? 7. Distinguish between a primary market and a secondary market. How does the secondary market aid the effectiveness of the primary market? 8. What is the principal-agent problem? 9. Give examples to illustrate the high interdependence existing between the different decision areas of corporate finance. 10. List as many financial intermediaries as you can. Describe the nature of their intermediation and explain the intermediate securities they create. 11. Given the following possible corporate objectives, provide a rational argument explaining which of them should be the main goal of the financial manager (a) profit maximization (b) sales maximization (c) maximization of benefit to employees and the local community (d) maximization of shareholder wealth 12. Illustrate the flow of funds between primary investors and ultimate borrowers in a modern economy. Give examples of intermediary activity 13. What are the economies of scale of financial intermediaries? 14. What difficulties might arise in state-owned industries in making financial decisions? 15. Explain the rationale for selecting shareholder wealth maximisation as the objective of the firm. Include a consideration of profit maximization as an alternative goal. 17. Briefly describe the following types of decisions (give examples) a) Financing b) Investment c) Treasury d) Risk management

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