You Have Completed An Internship In The Finance Division ✓ Solved

You Have Completed An Internship In The Finance Division

You have completed an internship in the finance division of a fast-growing information technology corporation. Your boss, the financial manager, is considering hiring you for a full-time job. He first wants to evaluate your financial knowledge and has provided you with a short examination. When composing your answers to this employment examination, ensure that they are cohesive and read like a short essay.

Your submission must address the following critical elements:

I. Analyze Roles and Responsibilities for Compliance

A. Examine the types of decisions financial managers make. How are these decisions related to the primary objective of financial managers?

B. Analyze the various ethical issues a financial manager could potentially face and how these could be handled.

C. Compare and contrast the different federal safeguards that are in place to reduce financial reporting abuse. Why are these considered appropriate safeguards?

II. Investment Options

A. If a private company is “going public,” what does this mean, and how would the company do this? What are the advantages of doing this? Do you see any disadvantages? If so, what are they?

B. How do the largest U.S. stock markets differ? Out of those choices, which would be the smartest private investment option, in your opinion? Why?

C. Compare and contrast the various investment products that are available and the types of institutions that sell them.

Paper For Above Instructions

Internship experiences in financial divisions are crucial for understanding the multi-faceted role of financial managers. The position of a financial manager entails making significant decisions that influence the financial health and strategic direction of the company. The primary objective of financial managers is to maximize shareholder value by making informed investment, financing, and operational decisions.

I. Analyze Roles and Responsibilities for Compliance

A. Types of Decisions Financial Managers Make

Financial managers are tasked with various pivotal decisions, which can generally be categorized into three core areas: investment decisions, financing decisions, and dividend decisions. Investment decisions involve selecting which projects or assets to invest in, focusing on maximizing returns while managing risks. Financing decisions pertain to the capital structure of the company — determining the best blend of debt and equity financing. Lastly, dividend decisions decide the allocation of profits—whether to reinvest them in the company or distribute them to shareholders. Each of these decisions is directly related to the primary objective of financial management, which is to increase the value of the firm to its shareholders through efficient resource allocation (Brealey, Myers, & Allen, 2020).

B. Ethical Issues in Financial Management

Ethical dilemmas are pervasive within financial management, arising from pressures such as profit maximization, competitive behavior, and personal gains. Financial managers may encounter issues like insider trading, manipulation of financial statements, and conflicts of interest. Addressing these ethical challenges requires a robust framework of corporate governance and adherence to ethical codes. Implementing comprehensive compliance programs, training sessions, and fostering an organizational culture that prioritizes ethical standards help mitigate these risks. Furthermore, open communication lines where employees can report unethical behavior without fear of retaliation play a significant role in managing ethical issues (Boatright, 2014).

C. Federal Safeguards Against Financial Reporting Abuse

To safeguard against financial reporting abuse, several federal regulations and oversight mechanisms are in place. The Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act are prominent examples. These laws enforce stricter reporting requirements, establish internal controls, and enhance accountability for corporate governance. Such safeguards are deemed appropriate as they aim to protect investors by promoting transparency and reducing the risk of financial fraud. Compliance with these regulations not only enhances the credibility of financial reporting but also fortifies investor trust in the capital markets (Coffee, 2007).

II. Investment Options

A. Going Public: Definition and Implications

For a private company, “going public” means offering shares to the public through an Initial Public Offering (IPO). This transition from private to public company involves regulatory compliance, financial audits, marketing the IPO, and finally listing shares on a stock exchange. The advantages include access to capital, increased visibility, and enhanced credibility. However, there are disadvantages, such as the loss of control, increased scrutiny from regulators and investors, and the pressure to meet quarterly performance expectations. Ultimately, companies must weigh these factors before making the decision to go public (Loughran & Ritter, 2004).

B. Differences in U.S. Stock Markets

The largest U.S. stock markets include the New York Stock Exchange (NYSE) and the Nasdaq. The NYSE is primarily known for its established companies and operates with a floor-based trading system, while the Nasdaq is famous for its technology-oriented companies and utilizes an electronic trading platform. In terms of investment opportunities, the Nasdaq offers a greater variety of tech-focused stocks, which may provide higher growth potential but also come with increased volatility. Depending on an investor's risk tolerance and market outlook, choosing between these markets can be pivotal (Schultz, 2002).

C. Investment Products and Institutions

Various investment products are available in the financial markets, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), and derivatives. These products are offered by a range of institutions, such as investment banks, asset management firms, and brokerage houses. Stocks represent ownership in a company, while bonds are debt securities issued by corporations or governments. Mutual funds pool resources from multiple investors to purchase a diversified portfolio, while ETFs track a specific index. Understanding the characteristics and risks associated with these products aids investors in making informed decisions that align with their financial goals (Markowitz, 1952).

References

  • Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance. McGraw-Hill Education.
  • Boatright, J. R. (2014). Ethics and the Conduct of Business. Pearson.
  • Coffee, J. C. (2007). Gatekeepers: The Professions and Corporate Governance. Oxford University Press.
  • Loughran, T., & Ritter, J. R. (2004). Why Has IPO Underpricing Increased Over Time? Financial Management, 33(3), 5-37.
  • Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
  • Schultz, P. (2002). The New York Stock Exchange: The Birth of a New Market. Financial Analysts Journal, 58(5), 18-34.
  • SEC. (2021). Overview of the Securities and Exchange Commission. Retrieved from https://www.sec.gov/about/what-we-do
  • West, A. (2015). Financial Fraud: A Compliance Framework. Business Horizons, 58(3), 267-275.
  • Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263-291.
  • Black, F. (1976). The Dividend Puzzle. The Journal of Portfolio Management, 2(2), 5-9.

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