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Define the goal of the firm from a finance perspective and relate this to the "stakeholder" approach

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1. Define the goal of the firm from a finance perspective and relate this to the "stakeholder" approach.

2. Relate the importance of economics and accounting to finance.

3. Define progressive taxes and why it is particularly important to the corporate form of business.

4. Contrast the information provided in the balance sheet and income statement.

5. Critique the benefits and drawbacks of proprietorships and partnerships as a form of business organization.

Please be as detailed as possible

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Solution Summary

The expert defines the goal of the firm from a finance perspective and relate this to the "stakeholders" approach. The importance of economic and accounting to finance are determined.

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1. The goal of the firm from a finance perspective is to maximize shareholder wealth. This relates to the stakeholder approach because according to the finance manager, without the help of stakeholders/shareholders investing their funds within the company, the company would not be able to expand the business, invest in more profitable projects, purchase new plant and equipment, or operate on a daily basis. Therefore, the finance manager uses financial ratios to assist him or her when making decisions on short and long-term projects and will the decisions make the company more profitable in the long-run. If so, they believe they are making the best use (maximizing) of shareholders/stakeholders money.

2. Finance is actually a combination of accounting and economics. In economics, a manager would have to pay close attention to supply and demand to determine the price of a good or the market value of a good, service, or business. In accounting, the accountant must keep good records of every transaction made with company funds and at the end of the month, quarter, or year, create financial statements. The role of the finance manager is to take in consideration how the economy will impact any transactions (used with company funds) made before making a decision. The finance manager will use the financial statements (i.e. balance sheet and income ...

Solution provided by:
Keonda Grant-Taylor, MBA
Education
  • Doctorate of Management in Organizational Leadership, University of Phoenix - Online
  • MBA, Webster Univeristy
  • Dual BS Degrees, University of South Carolina
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