discussion questions

I’m stuck on a Business question and need an explanation.

lesson 2

The CFO set a strong form of efficiency in delivering a positive information about his company. Each day that the CFO wear green suit, which most employees will indicate that the company stock investment has increase. As an employee, i will profit in buying share from the firm. Investing stock is the best way for the company to gain money and along myself. I sometimes ask myself about how to buy and sell shares online because they either want to make money on profits or gain some trading experience. Both are possible, and can also be fun, if you select the right stocks. You can make a profit if your share pays dividends or its price increases. As you gain experience, you will improve on your financial literacy. Long-term investments is one of the best investment.

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Taking into account that I have cracked the code in regards to the CEO releasing positive information when he wears a certain green suit, the form of market efficiency that would be consistent with my belief is Semi-Strong form of market efficiency. The exigence that prompted me to choose this form of market efficiency is due to the fact that the investor themselves need private information that is strong enough to earn an abnormal amount by analyzing information that is available to the public and privately (Maverick, 2019). Taking into account the green suit of the CEO, this information is valuable and also strong enough in order to utilize it to earn an abnormal amount from the investment itself, which would be considered private. To conclude, the information on the green suit is ensured by the private information.

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lesson 1 (dis 2)

The goal of financial management is to first maximize the current value per share of the company’s existing stock. Second, to maximize the market value of the existing owner’s equity. Why maximize the value of the company and stock? Because it rewards the owner’s of the company. With that being said, managers of a company do not profit directly from the goal to maximize shareholders wealth unless they too, are shareholders. This can sometimes create a conflict which is referred to as the agency problem. Profit maximization does not take into account the concepts of risks and rewards as shareholder maximization does. Profit maximization is more along the lines of a short-term financial management goal.

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Profit maximization was a traditional cornerstone of business teachings for years, and today, there is still a motive for businesses to earn profits. However, this thought process is evolving and financial management understands the necessity for wealth accumulation over profit maximization. The goal of financial management is to maximize the value of the company and stock. This in turn rewards the owners and negates some of the serious drawbacks associated with profit maximization, such as a largely ambiguous definition of the concept and it’s inability to account for the firm’s cash flows. An increase in profit should not be the sole motive/intention of a business. Growth of market share and expansion of business should be the primary objective, reinvesting the profits in an effort to acquire this aim. I worked as a consultant to a small investment firm specializing in substance abuse and mental health treatment centers. The firms primary focus was to expand and accrue over a 3 year period, reinvesting their earnings while remaining consistent in achieving their goals of minimizing risk and maintaining specific aspects of their companies vision. The private firm was successful in obtaining their 3 year goal by maximizing the current value of their owner’s equity.

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Why is it important to consider the consequences of taxes when financing a new project? Can you think of a situation in your own personal finances where taxes might influence whether you choose to make a purchase?

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When looking at the income statement for your firm, you notice that your Cost of Goods Sold was $1M in 2012, $1.2M in 2013 and $2M in 2014. How will you determine if there is an issue you should be worried about? What other types of financial statements might you look at to see if there is an issue and why?

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