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The importance of ethics in a business
Ethics in modern business life
Ethics in modern business life
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Recommended: The importance of ethics in a business
Mini Case
Jorge Alfredo Corella de Cima
FIN-317
February 2, 2016
Paul Hubble
The appropriate goal for a firm is to maximize shareholders’ wealth or creating value for the firm owners (shareholders). Therefore, the financial manager’s goal is to generate wealth for the shareholders, through making decisions that will exploit the current common stock prices. This is because it not only directly benefits the company shareholders, but also offers benefits to the society given that scarce resources are put to their best use by entities competing to generate wealth (Keown, Martin, and Petty, 2011).
The risk-return trade-off is the sum of expected return or earnings for delaying consumption and the additional expected return
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An efficient market is a market wherein the securities’ prices at any moment in time wholly reflect all publicly accessible information about the securities as well as their real public value. Efficient markets guide our (investors) decisions as whether to buy or sell shares of stock depending on the newly released information. Note that an efficient market is determined by the speed with which freshly released information is held into prices (Keown, Martin, and Petty, 2011).
Ethics and ethical behaviors are an essential component to long-term business and personal success. Ethical lapses are unforgivable in finance and usually result in financial scandals as those witnessed at Arthur Andersen, Enron, and WorldCom. Ethical behavior (doing the right thing) plays a big role in determining the future of a business. Unethical behavior destroys trust, which is an important component that an entity cannot function without. Ethical errors would either result in some going to jail or end of careers, thus terminating future prospects (Keown, Martin, and Petty,
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On the other hand, to align their interests with those of shareholders, a compensation package can be used. For instance, managers and shareholders’ interests could e aligned through establishing bonuses, perquisites, and management stock options that are directly related to how closely their decisions match the shareholders’ interest (Brigham and Houston, 2013).
A sole proprietorship is a form of business owned by one individual wherein he or she retains the business’ assets title and is generally responsible for the liabilities suffered from limitation.
A partnership is a relationship between two or more persons joining together as co-owners to run a business with the aim of making a profit. There are two forms of partnerships: general partnership in which every partner is fully liable for the liabilities incurred by the entity; and limited partnership wherein, at least, one partner has a limited liability, confined to the individual’s capital contribution to the
Disputes are almost unavoidable between people when there are disagreements or misunderstandings. In the construction industry, contractual relationships could lead to dispute. To resolve disputes, construction disputes are most likely encouraged to use Alternative Dispute Resolutions such as arbitration, mediation, and mini-trials to resolve their disputes faster and keep the dispute confidential and at lower cost (Ray, 2000). The construction case presented in this paper first resorted to negotiation; however, it could not give the parties a resolution which led to a mini-trial.
A proprietorship is also known as sole-proprietorship is a business which is owned by a single individual. Although the proprietorship is easy to get into, in most of the state, even the smallest business in HCO needs to be registered and licensed by the state. This form of organization is easy to form with limited resources and is subject to few governmental regulations
Similar to a sole proprietorship a partnership can be started easily and is easy when he comes to taxes in filing each partner is taxed according to the amount of sharing the holding the business this also means profits ar...
The first positive impact of employing the share-based compensations is to align the managers’ interest with shareholders’ interests, as public companies become larger and matured, the interests of shareholders and managers have diverged. According to Hannes(2007), share-based compensation can solve the agency problems between shareholders and managers, as it motivates the managers to act in the interest of shareholders by tying the compensation amount managers receive to the market price of the company stock, for example, if the manager helps the company to achieve a predetermined sales level or increase the share price, then the share-based compensation allows managers to share in the growth of the company’s stock price.
A sole proprietorship is a type of business that is owned an operated by one individual. Legally, there is no difference between the owner and the individual.
A partnership is very similar to a sole proprietorship except that that there are two of more owners. It is defined as a voluntary association of two or more persons to carry on as co-owners in a lawful business for profit. The people involved in the partnership are called the partners and they are considered agents rather than employees of the partnership. The way partnership gains and losses are split are described in the partnership agreement. This agreement can be an informal oral agreement or a lengthy, formal written document. There are a few types of partnerships. A general partnership which is created to carry on a particular kind of business; a special partnership which is created for a single transaction; a trading partnership which is created for buying and selling purposes; and a nontra...
d. Usually stock compensation may be the motivation the managers have to make decisions to maximize the stock price, because they may be beneficiary as they may also be the company shares holders. Other managers with bad faith use accounting tricks to overstate the share price and sell it expensively to generate more profits. This strategy is critical and companies that offer options as remuneration are advised to allow managers to hold the stock for a number of
Amy tells her rich friend Bob about her project and he thinks it is a great idea. He offers to contribute $20,000 in return for a piece of Amy’s business. However, Bob is a busy doctor who doesn’t have time to be involved in the day to day running of the restaurant. He simply wants to invest his money with hopes of a profit, but does not want to end up losing more than his initial $20,000 if Amy’s business fails. If Amy decides to accept Bob’s proposal to be her partner, in this case this type of business calls Limited Partnership. Also known as a partnership with limited liability. Limited partnership is more complex than general partnerships. Limited partnerships allow partners to have limited liability as well as limited input with management decisions. These limits depend on the extent of each partner’s investment percentage. Limited partnerships are attractive to investors of short-term
A partnership is a relationship which subsists between two or more persons carrying on a business in common with a view to profit. (Partnership Act 1890, S1,SS1). Persons involved, numbered from two to unlimited, are called partners. Each partner
In business, partnership is one of the oldest form. The history of the partnership says that, “laws on partnerships can be found in Hammurabi’s code as well in early Hebrew and Roman texts.” Partnership law can be said as necessary to an entrepreneur or a shareholder of a company because without the partnership law an entrepreneur or a business man cannot run a business successfully. Furthermore, partnership is constructed to make a business successful by giving new ideas and get the part of a divide from the profit they earn. Partnership Act 1961 governs the law of partnership. Partnership is defined by Section 3(1) of the Partnership Act 1961 which said that partnership is the relation which subsists between persons carrying on a business
To alligned manager interests and objectives with the shareholder by carrying out efficient management system. For examples, executive compensation plans, pension scheme, stock option and direct monitoring by boards.
A stock market is a place where stocks and bonds are regularly traded. The stock market plays an important role in the economy where the prices of the stock reflect upon the growth of the country’s economy. Companies who choose to list themselves in the stock market are known as public listed companies where their company assets are open for investment to the public. The stock market connects the buyer and seller where companies are in need of funds and investors are looking for a place to invest their money in. Investors who have invested money into the stocks of the public listed company are now shareholders of that company, where investors now own a part of the company. The purpose of investors investing their money into the stock market is for the financial return, also known as profits. If the company or firm makes a profit, shareholders will be rewarded with dividends however, if the company is making losses, shareholders will also be making a loss in their investment. The stock market prices are volatile where prices rise and fall on a daily basis therefore, investors who invests in the stock market should be aware of the risks involved.
The theory discusses the relationship between different securities and then draws inter-relationships of risks between them. It assumes that investors are “risk averse” and so the investment decisions should be based on efficient portfolio concept depicting the investor’s preference for maximum return for the given level of risk or minimum risk for the given level of expected return. Also, securities with low or negative covariance amongst them can help reduce the risk. Roy (1952) independently developed the “safety first” model with similar features to Markowitz model but due to earlier publication of Markowitz, he is regarded as the “godfather” of portfolio theory. Tobin (1958) enlarged the Markowitz’s analysis by putting forward separation theorem suggesting manner of fund allocation between risky and risk-free
This paper will define and discuss five financial theories and how they impact business decisions made by financial managers. The theories will be the Modern Portfolio Theory, Tobin Separation Theorem, Equilibrium Theory, Arbitrage Pricing Theory (APT), and the Efficient Markets Hypothesis.
Management’s primary objective should be to maximize stockholders wealth. In order for management to fulfill their primary objective, several aspects are simultaneously at play. If management is forthright and provides stockholders relevant information, the market price will appropriately reflect the intrinsic price or the fundamental price. Also to generate fundamental company value, raising stock prices, management needs to create products that consumers want at a quality and price that consumers are willing to pay for. Also management needs to demonstrate the affects they have at aiding the company in generating cash flow. Three aspects can determine