L1: Overview, Corporate Gov, Tax

Question 1

What are the key ways a company can produce wealth?

Answer 1

• Profit
• Investment
• Growth
• Mergers/takeovers

Question 2

What are the primary drivers of financial engineering?

Answer 2

Risk management and legitimate exploitation of loopholes in tax laws

Question 3

What are some potential sources of disruption to the market?

Answer 3

• New tech
• New concepts
• Policy changes

Question 4

Why are corporate governance rules needed?

Answer 4

Conflict of interest between shareholders (owners) and directors/employees, who don’t always represent the best interest of the shareholder

Question 5

What is good corporate governance based on? What three groups can these rules be placed into?

Answer 5

A framework of rules to control behaviour of directors, provide shareholder confidence and trust, and deliver market stability. Can be grouped into disclosure, accountability and fairness.

Question 6

What is the main result that we want to avoid from poor corporate governance?

Answer 6

Financial instability

Question 7

Why might a government introduce low corporation tax?

Answer 7

To incentivise large corporations to keep their money ‘home’ rather than overseas