On the other hand, the shareholders own a corporation or you could say corporations are owned by its stockholders. This could range from a single shareholder in a closely held corporation to hundreds of thousands of shareholders in a publicly traded organization.
Furthermore, some of the key terms that associated with Corporate or Managerial finance would be Liability - financial claims towards an organization assets which is not consider equity, Cash flows which consider money moving through companies, Corporation which is a distinct legal entity and Assets that could help the business in return.
In addition, three main concerns are Capital Budgeting which is the process by which the firm decides which long-term investments to make. Next, Capital Structure which represents the proportions of the firm’s financing from current and long-term debt and equity. Lastly, Net working capital which considers short-term management of assets and liabilities.
Ross, Westerfield, & Jaffe. (2013). Corporate Finance. New York: McGraw-Hill Irwin.
Can the goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior?
All public organizations have a goal of maximizing shareholder value. However, if they did not, they would more than likely not be in business for a long period of time. A lot of the huge accounting frauds that we heard about throughout the years started due to management gets nervous about shareholder value. Management sees that the return is less than expected, and start to think of...