Answers to questions about finance

Answers to questions about finance
Edelvis Rodríguez
Ana G. Méndez University System
FINA 202

Answers to questions about finance
1 ) Compare and contrast the goals of maximizing profit andmaximizing the Stockholders’ equity.
It is first necessary to define both terms, maximizing profit and maximizing Stockholders’ equity. Profit maximization is a financial process that is put intopractice in business to determine what the best product and price levels in order to maximize profitability. The objective of profit maximization is a short-term goal of financial management. Maximizationof Stockholders is put into practice when business managers try to maximize the wealth of your company to try to increase the stock price and in turn with increasing the stock price increasesshareholders' equity.
Comparing both methods we can say that profit maximization does not take into account the concepts of risk and reward as the maximization of shareholders because it makes the goal ofprofit maximization is a short-term goal of financial management used to create a cash flow in order to obtain benefits such as reducing debt or saving for growth. If a company were to focus only onmaximizing profits, may miss opportunities for investment and expansion that gives such increase in cash flow. Despite the differences between both methods, one goes hand in hand with the other becausea company has to perform well for its shareholders, who expect a return on their investments.
2) What is the relation between financial decisions with risk and return?
It is well known that thereis an inverse relationship between return and risk, i.e. for a given level of risk is expected a corresponding return, and vice versa.
3) Define: (a) Proprietorship, (b) Partnership, and (c)Corporation.
A) Proprietorship: It is a form of business which is considered the owner and his company as one in a legal sense. Therefore, they not taxed separately from the company. They pay income tax on...