Need 2 Answers Week 13 Discussion In This Week's Discussion
Need 2 Answersweek 13 Discussionin This Weeks Discussionprepare A
Need 2 answers week 13 discussion in this week's discussion, prepare a synopsis of the material discussed in the chapter readings. In your post, share any questions you may have regarding the managerial finance concepts presented in the textbook. This synopsis should be 450+ words. Problem Set #13 Please, address each of the questions below, in words (per question). Include any relevant examples and links to your sources.
1. What are some benefits of being a company owner / manager?
2. How can borrowers' decisions affect the lenders, after the loan is originated?
3. How do creditors protect themselves against harmful actions by stockholders?
Paper For Above instruction
In week 13's discussion, the primary objective is to synthesize key concepts from the chapter readings related to managerial finance, while also raising pertinent questions for further understanding. The material emphasizes the multifaceted roles and benefits of being a company owner or manager, the dynamics between borrowers and lenders, and the protective mechanisms creditors employ to mitigate risks posed by stockholders’ actions.
Starting with the benefits of being a company owner or manager, owners and managers enjoy several advantages, primarily the potential for profit and control over business decisions. Ownership provides a share of the company’s profits through dividends or appreciation of stock value, which can lead to significant financial rewards. Managers, on the other hand, have the authority to steer the company's strategic direction, influence operational practices, and make decisions that align with stakeholder interests, which can lead to personal career growth and reputation enhancement. Moreover, ownership and managerial positions often come with increased influence, decision-making power, and the opportunity to shape the company’s future trajectory.
Borrowers’ decisions significantly impact lenders after the initial loan agreement has been established. Once a loan is originated, borrowers still make ongoing decisions about their use of funds, repayment schedules, and future borrowing activities. Poor financial management, increased risk-taking, or inability to meet repayment obligations can lead to loan default or deterioration of credit quality, which adversely affects lenders' returns and risk exposure. Conversely, responsible borrowing and prudent financial management help maintain the borrower's creditworthiness and ensure smoother repayment, thereby protecting the lender’s investment. Borrowers’ decisions can also influence the lender's perception of risk, impacting future interest rates and lending conditions.
Creditors employ various strategies to safeguard themselves against potentially harmful actions by stockholders—primarily concerns about the misuse of company assets or decisions that might reduce shareholder value—such as taking excessive risks or diverting company resources for personal gain. One common protective measure is the implementation of covenants and contractual agreements within debt contracts that restrict certain activities unless specific conditions are met. Additionally, creditors often perform rigorous monitoring of the company's financial health and governance practices. Structural safeguards, like secured loans, ensure that creditors have claims on assets if the company defaults. Lastly, the presence of regulatory oversight and internal controls helps align the interests of creditors and shareholders, minimizing the risk that stockholders’ actions will harm creditors’ investments.
In summary, understanding the interconnected roles of ownership, borrowing, and creditor protection highlights core principles in managerial finance, emphasizing the importance of strategic decision-making, risk management, and stakeholder oversight. Such insights foster responsible financial practices that benefit all parties involved—from managers and owners to lenders and creditors.
References
- Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice. Cengage Learning.
- Ross, S. A., Westerfield, R., & Jaffe, J. (2021). Corporate Finance. McGraw-Hill Education.
- Damodaran, A. (2015). Applied Corporate Finance. Wiley.
- Fabozzi, F. J., & Drake, P. P. (2009). The Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management. Wiley.
- Berk, J., & DeMarzo, P. (2020). Corporate Finance. Pearson.