I Need Help Revising This Finance Paper Complete The Followi

I Need Help Revising This Finance Papercomplete The Following Questio

Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of XYZ, Inc. One of the firm’s clients is Sofia Matias, a professional tennis player who has just come to the United States from Chile. Matias is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through XYZ, Inc. Matias is very bright, and she would like to understand in general terms what will happen to her money.

Your boss has developed the following set of questions you must answer to explain the U.S. financial system to Matias. Why is corporate finance important to all managers? Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. How do corporations go public and continue to grow?

What are agency problems? What is corporate governance? What should be the primary objective of managers? Do firms have any responsibilities to society at large? Is stock price maximization good or bad for society?

Should firms behave ethically? What three aspects of cash flows affect the value of any investment? What are free cash flows? What is the weighted average cost of capital? How do free cash flows and the weighted average cost of capital interact to determine a firm’s value?

Who are the providers (savers) and users (borrowers) of capital? How is capital transferred between savers and borrowers? What do we call the cost that a borrower must pay to use debt capital? What two components make up the cost of using equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates in the economy?

What are some economic conditions that affect the cost of money? What are financial securities? Describe some financial instruments. List some financial institutions. What are some different types of markets?

Along what two dimensions can we classify trading procedures? What are the differences between market orders and limit orders? Explain the differences among broker-dealer networks, alternative trading systems, and registered stock exchanges. Briefly explain mortgage securitization and how it contributed to the global economic crisis. The Module 1 Competency Assessment has three parts.

Part 1: Organizational Forms

Describe the organizational form options used by companies as they grow. Explain the advantages and disadvantages of each form, including sole proprietorships, partnerships, and corporations. Sole proprietorships are easy to establish and offer complete control but carry unlimited liability. Partnerships allow resource pooling but also involve joint liability. Corporations offer limited liability and access to capital markets but entail more complex formation and regulatory requirements.

Part 2: Stakeholders and Corporate Objectives

Identify the primary objectives of managers, which generally focus on maximizing shareholder value. Discuss the importance of ethical behavior and social responsibilities, emphasizing that firms should operate ethically to maintain trust and sustainability. Explain how stock prices influence society: rising stock prices can benefit shareholders and the economy, whereas neglecting social responsibilities can lead to economic downturns or social harm.

Part 3: Economic Conditions and Financial Metrics

Explain economic conditions influencing the cost of money, such as inflation rates, monetary policy, and economic growth. Describe the weighted average cost of capital (WACC), which blends the cost of debt and equity, representing the minimum return required by investors. Discuss how capital transfers occur between savers and borrowers through financial institutions and markets, and the components influencing the cost of finance—interest rates, inflation, risk premiums, and economic stability.

Economic conditions that impact the cost of money include changes in interest rates set by central banks, economic growth rates, inflation expectations, and global economic stability. Financial securities, such as bonds, stocks, and derivatives, facilitate capital transfer and risk management. Financial instruments include treasury bonds, corporate bonds, stocks, options, and swaps. Financial institutions encompass banks, investment firms, insurance companies, and mutual funds, which facilitate the flow of funds and liquidity in the economy.

Trading procedures can be classified along two dimensions: type of order (market vs. limit) and type of trading system (broker-dealer networks, alternative trading systems, or stock exchanges). Market orders execute immediately at prevailing prices, whereas limit orders specify a price but may not be executed immediately. Broker-dealer networks involve intermediaries who facilitate trading; alternative trading systems are electronic platforms outside traditional exchanges; and registered stock exchanges are formal marketplaces like the NYSE and NASDAQ. Mortgage securitization involved pooling mortgage loans into securities, which was instrumental in the 2008 financial crisis by creating high-risk financial products that contributed to the collapse.

Conclusion

Understanding these fundamental concepts—organizational forms, corporate governance, financial metrics, and market mechanisms—is crucial for providing sound financial advice. As an investment advisor, grasping how firms operate and how financial markets function enables effective guidance for clients like Sofia Matias and contributes to the overall stability and efficiency of the financial system.

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