Solution Manual for Intermediate Accounting 18th Edition, by Donald E. Kieso, Jerry J. Weygandt and Terry D. Warfield .Chapter 1- 23 | Complete Guide A+

SOLUTION MANUAL for Foundations of Financial Management,
x x x x x x




18th Edition by Stanley Block, Geoffrey Hirt,
x x x x x x x




Chapters 1 – 21, Complete
x x x x

,
, Chapter 1 x


The Goals and Functions of Financial Management
x x x x x x




Discussion Questions
x




1-1 What xeffect xdid xthe xrecession xof x2007-2009 xhave xon xgovernment xregulation?

It xwas xgreatly xincreased.

1-2 What xadvantages xdoes xa xsole xproprietorship xoffer? xWhat xis xa xmajor xdrawback xof xthis xtype xof
xorganization?




A xsole xproprietorship xoffers xthe xadvantage xof xsimplicity xof xdecision xmaking xand xlow
xorganizational xand xoperating xcosts. xA xmajor xdrawback xis xthat xthere xis xunlimited xliability xto xthe

xowner.




1-3 What xform xof xpartnership xallows xsome xof xthe xinvestors xto xlimit xtheir xliability? xExplain
xbriefly.




A xlimited xpartnership xallows xsome xof xthe xpartners xto xlimit xtheir xliability. xUnder xthis
xarrangement, xone xor xmore xpartners xare xdesignated xgeneral xpartners xand xhave xunlimited

xliability xfor xthe xdebts xof xthe xfirm; xother xpartners xare xdesignated xlimited xpartners xand xare

xliable xonly xfor xtheir xinitial xcontribution. xThe xlimited xpartners xare xnormally xprohibited xfrom

xbeing xactive xin xthe xmanagement xof xthe xfirm.




1-4 In xa xcorporation, xwhat xgroup xhas xthe xultimate xresponsibility xfor xprotecting xand xmanaging xthe
xstockholders’ xinterests?




The xboard xof xdirectors.

1-5 What xdocument xis xnecessary xto xform xa xcorporation?

The xarticles xof xincorporation.

1-6 What xissue xdoes xagency xtheory xexamine? xWhy xis xit ximportant xin xa xpublic xcorporation
xrather xthan xin xa xprivate xcorporation?

, Agency xtheory xexamines xthe xrelationship xbetween xthe xowners xof xthe xfirm xand xthe xmanagers xof
xthe xfirm. xIn xprivately xowned xfirms, xmanagement xand xthe xowners xare xusually xthe xsame xpeople.

xManagement xoperates xthe xfirm xto xsatisfy xits xown xgoals, xneeds, xfinancial xrequirements xand xthe

xlike. xAs xa xcompany xmoves xfrom xprivate xto xpublic xownership, xmanagement xnow xrepresents xall

xowners. xThis xplaces xmanagement xin xthe xagency xposition xof xmaking xdecisions xin xthe xbest

xinterest xof xall xshareholders.




1-7 What xare xinstitutional xinvestors ximportant xin xtoday’s xbusiness xworld?
Because xinstitutional xinvestors xsuch xas xpension xfunds xand xmutual xfunds xown xa xlarge xpercentage
xof xmajor xU.S. xcompanies, xthey xare xhaving xmore xto xsay xabout xthe xway xpublicly xowned

xcompanies xare xmanaged. xAs xa xgroup, xthey xhave xthe xability xto xvote xlarge xblocks xof xshares xfor

xthe xelection xof xa xboard xof xdirectors, xwhich xis xsupposed xto xrun xthe xcompany xin xan xefficient,

xcompetitive xmanner. xThe xthreat xof xbeing xable xto xreplace xpoor xperforming xboards xof xdirectors

xmakes xinstitutional xinvestors xquite xinfluential. xSince xthese xinstitutions, xlike xpension xfunds xand

xmutual xfunds, xrepresent xindividual xworkers xand xinvestors, xthey xhave xa xresponsibility xto xsee xthat

xthe xfirm xis xmanaged xin xan xefficient xand xethical xway.




1-8 Why xis xprofit xmaximization, xby xitself, xan xinappropriate xgoal? xWhat xis xmeant xby xthe xgoal xof
xmaximization xof xshareholder xwealth?




The xproblem xwith xa xprofit xmaximization xgoal xis xthat xit xfails xto xtake xaccount xof xrisk, xthe
xtiming xof xthe xbenefits xis xnot xconsidered, xand xprofit xmeasurement xis xa xvery xinexact xprocess. xThe

xgoal xof xshareholders’ xwealth xmaximization ximplies xthat xthe xfirm xwill xattempt xto xachieve xthe

xhighest xpossible xtotal xvaluation xin xthe xmarketplace. xIt xis xthe xone xoverriding xobjective xof xthe

xfirm xand xshould xinfluence xevery xdecision.




1-9 When xdoes xinsider xtrading xoccur? xWhat xgovernment xagency xis xresponsible xfor xprotecting
xagainst xthe xunethical xpractice xof xinsider xtrading?




Insider xtrading xoccurs xwhen xanyone xwith xnon-public xinformation xbuys xor xsells xsecurities xto
xtake xadvantage xof xthat xprivate xinformation. xThe xSecurities xand xExchange xCommission xis

xresponsible xfor xprotecting xmarkets xagainst xinsider xtrading. xIn xthe xpast, xpeople xhave xgone xto xjail

xfor xtrading xon xnon-public xinformation. xThis xhas xincluded xcompany xofficers, xinvestment

xbankers, xprinters xwho xhave xinformation xbefore xit xis xpublished, xand xeven xtruck xdrivers xwho

xdeliver xbusiness xmagazines xand xread xpositive xor xnegative xarticles xabout xa xcompany xbefore xthe

xmagazine xis xon xthe xnewsstands xand xthen xplace xtrades xor xhave xfriends xplace xtrades xbased xon

xthat xinformation. xThe xSEC xhas xprosecuted xanyone xwho xprofits xfrom xinside xinformation.




1-10 In xterms xof xthe xlife xof xthe xsecurities xoffered, xwhat xis xthe xdifference xbetween xmoney xand
xcapital xmarkets?




Money xmarkets xrefer xto xthose xmarkets xdealing xwith xshort-term xsecurities xthat xhave xa xlife xof
xone xyear xor xless. xCapital xmarkets xrefer xto xsecurities xwith xa xlife xof xmore xthan xone xyear.




1-11 What xis xthe xdifference xbetween xa xprimary xand xa xsecondary xmarket?