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Tan Peter (SCSJ-0017349)
UGB223 Business Finance
24/09/2014
Tutorial 1
1. Why dividends are important to shareholders? How to maximize dividends?
Dividend was defined as profit which distribute by corporate to shareholders. Shareholders invested their money to the corporate, they expecting to receive dividend as return and shareholders’ value. Therefore, shareholders were did a lots of research before they make decision to invest their money to the corporate because they expecting the dividends will paid by corporate to them as profit.
One of the solutions to maximize the dividend which is call “ Covered Call ” . A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. If a trader buys the underlying instrument at the same time the trader sells the call, the strategy is often called a "buy-write" strategy. In equilibrium, the strategy has the same payoffs as writing a put option. The basic goal of a covered call is to create income and reduce risk.
2. How could you manage agency problem?
Agency problem define as conflicts of interest among stockholders, bondholders, and managers. When agency problem happening, it can affecting the progress of the corporate management and become a lots of issue in terms of management, financial, and other department in the corporate. To manage the agency problem, communication is very important between communicating with stockholders, bondholders, and managers. Each party should understand fully about the interest from other side before making any decision. When a conflict of interest happening in communicating, every party should discuss with each other and making a right decision to satisfy every party’s needs and wants. However, agency relationship between stockholders, bondholders, and managers are also important to solve the agency problem.
3. Compare between Performance
UGB223 Business Finance
24/09/2014
Tutorial 1
1. Why dividends are important to shareholders? How to maximize dividends?
Dividend was defined as profit which distribute by corporate to shareholders. Shareholders invested their money to the corporate, they expecting to receive dividend as return and shareholders’ value. Therefore, shareholders were did a lots of research before they make decision to invest their money to the corporate because they expecting the dividends will paid by corporate to them as profit.
One of the solutions to maximize the dividend which is call “ Covered Call ” . A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. If a trader buys the underlying instrument at the same time the trader sells the call, the strategy is often called a "buy-write" strategy. In equilibrium, the strategy has the same payoffs as writing a put option. The basic goal of a covered call is to create income and reduce risk.
2. How could you manage agency problem?
Agency problem define as conflicts of interest among stockholders, bondholders, and managers. When agency problem happening, it can affecting the progress of the corporate management and become a lots of issue in terms of management, financial, and other department in the corporate. To manage the agency problem, communication is very important between communicating with stockholders, bondholders, and managers. Each party should understand fully about the interest from other side before making any decision. When a conflict of interest happening in communicating, every party should discuss with each other and making a right decision to satisfy every party’s needs and wants. However, agency relationship between stockholders, bondholders, and managers are also important to solve the agency problem.
3. Compare between Performance