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CHAPTER 1 Introduction to Financial Management 19 organization? What benefits are there to these types of business organization as opposed to the corporate form? LO 3 1.3 Corporations What is the primary disadvantage of the corporate form of organization? Name at least two of the advantages of corporate organization. LO 3 1.4 Corporate Finance Organization 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! LO 2 1.5 Goal of Financial Management What goal should always motivate the actions of the firm's financial manager? LOA 16 Agency Problems who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise? LO 3 1.7 Primary versus Secondary Markets You've probably noticed coverage in the financial press of an initial public offering (IPO) of a company's securities. The social networking company Snapchat is a relatively recent example. Is an IPO a primary market transaction or a secondary market transaction? LO 3 1.8 Auction versus Dealer Markets What does it mean when we say the New York Stock Exchange is an auction market? How are auction markets different from dealer markets? What kind of market is NASDAQ? LO 2 1.9 Not-for-Profit Firm Goals Suppose you were the financial manager of a not-for-profit business (a not-for-profit hospital, perhaps). What kinds of goals do you think would be appropriate LO 2 1.10 Ethics and Firm Goals Can our goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior? In particular, do you think subjects such as customer and employee safety, the environment, and the general good of society fit in this framework, or are they essentially ignored? Try to think of some specific scenarios to illustrate your answer. LO 2 1.11 International Firm Goal Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not? LOA 1.12 Agency Problems Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding stock. Your company's management immediately begins fighting off this hostile bid. Is management acting in the shareholders' best interests? Why or why not? L04 1.13 Agency Problems and Corporate Ownership Corporate ownership varies around the world. Historically, individuals have owned the majority of shares in public corporations in the United States. In Germany and Japan, however, banks, other large financial institutions, and other companies own most of the stock in public corporations. Do you think agency problems are likely to be more or less severe in Germany and Japan than in the United