Introduction to Finance
10 important questions on Introduction to Finance
What is the difference between a private company and a corporation?
What are the characteristics of a corporation?
2. Shares are easily transferable (guarantees continuity of organisation)
3. Organisation has unlimited life
What are articles of incorporation?
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What 2 boards are there in case of a two-tier system?
2. Supervisory board - supervises executive board, elected by shareholders and employees
What is a type I agency relationship?
What are the 2 types of agency costs?
2. Monitoring costs - to control the activities of management. E.g. payment for audit
What are the 2 economic incentives to ensure that managers maximise shareholders' wealth?
2. Promotion - local managers perform well within company, they can move up and make more salary
What does the salary of board members consist of?
2. Stock option grant (option to buy shares at a certain price)
3. Restricted stock grant (shares are issued to executives that may not be sold before a certain date)
4. Other benefits, e.g. tax benefits, insurances, etc.
What is a type II agency relationship?
What are minority shareholders?
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