Concept explainers
To critically think about: Whether the goal of maximizing the firm’s stock value conflict with other goals, like avoiding illegal or unethical behavior.
Introduction:
The
To critically think about: Whether the environment, employee and customer safety, and the general good of the society fit in this framework or they are ignored. Illustrate with a specific scenario.
Introduction:
The financial managers make decision for the sake of the shareholders, which must be in the legal and ethical environments. If the shareholders want to buy the shares, then it is beneficial and a good decision, which increases the value of the stock. However, poor or unethical decisions will reduce the value of the stocks.
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
CORPORATE FINANCE--CONNECT ACCESS CARD
- How does an investment advisor deal with a situation where he is convinced the client’s investment decisions fall outside his investment objectives and risk tolerance? What are the ethical issues?arrow_forwardEvaluate earnings management from a utilitarian perspective. Can earnings management be an ethical practice? Discuss why or why not.arrow_forwardWhich is not an organization's response to risks? *a. An organization may accept the risk if it is prepared to absorb or mitigate the impact of the risk.b. An organization may take the risk but tries to lower the impact and possibility of occurrence of the risk.c. An organization may take the risk but not the returns that come with it.d. An organization may opt not to take the risk by avoiding the activity with associated risk.arrow_forward
- Implications of the business risk approach?arrow_forwardFirms with higher ethical standards will experience a higher level of economic performance than firms with lower or poor ethical standards. Do you agree? Why or why not?arrow_forwardThe chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.arrow_forward
- Why might one expect managers to act in shareholders' interests? Give some reasons.arrow_forwardExplain the problems of adverse selection and moral hazard caused by asymmetricinformation. How can financial intermediaries alleviate those problems?arrow_forwardconsidering the need to get to know the customer, how does the advisor present financial products fairly? And does a comparative of financial products always work? Can the behavioral component of the client to purchase a financial product and the complexity of the financial product provide a hinderance to an ethical presentation?arrow_forward
- Why do you think studies show that no single factor has a bigger impact on the ethicality of a firm’s culture than the personal examples set by firm leaders?arrow_forwardWhat would you say is the definition of business ethics?arrow_forwardExplain the following in simple words or explanation: Would scenario planning cause the company to be misdirected? Why is scenario planning important in the business or in the workplace? How is scenario planning different from strategic planning?arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning