S2W2 corporation

Question 1

corporation

Answer 1

legal entity
owned by shareholders with limited liability
private and public

Question 2

private v public corporation

Answer 2

private (plc): no shares on stock market, smaller, no minimum assets
public (ltd): shares on SE, min assets 12.5

Question 3

corporate governance

Answer 3

way in which organisations are administer directed and controlled
- shareholders, board of directors, management board (led by CEO), staff

Question 4

Investment decision

Answer 4

purchase of real assets, management of assets and investment risk

Question 5

financing decision

Answer 5

sale of financial assets/securities, capital structure decision, repay debt

Question 6

what is the capital structure decision?

Answer 6

choosing between fininacing through debt or equity

Question 7

key goal of corporation

Answer 7

shareholder wealth maximiation
NOT profit

Question 8

agency problem

Answer 8

separation of owership and control:
3 issues:
1. separation of ownership and control
2. information asymmetry
3. interest conflicts