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What is the primary objective of the corporation?

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Question 1
What is the primary objective of the corporation and why is it the objective?

Question 2
How would you determine or measure the ability of a company to pay its bills?

Question 3
What are 3 limitations of ratio analysis?

Question 4
What is financial leverage and how would you measure it?

Question 5
Explain risk in a portfolio context.

Question 6
What does beta measure?

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Solution Preview

Question 1
What is the primary objective of the corporation and why is it the objective?

The main objective of the corporation is to maximize shareholders wealth. This is because shareholders own the company and they acquire stocks in the company so that they can get a good return on their investment. Generally, shareholders hire company directors who in turn hire manager s to manage the day to day business activities of the company. Since managers are indirectly hired by shareholders, they make policies that enhance shareholders value so that they can stay at their jobs. If a manager fails to deliver, he/she would be replaced.

Question 2
How would you determine or measure the ability of a company to pay its bills?

The ability of the company to pay its bills can be determined by the liquidity ratios. Liquidity ratio is a ...

Solution Summary

The primary objective of the corporation and why is it the objective is determined is determined. The measure ability of a company to pay its bills are determined.

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