Assume that you recently finished your second-year studies in the corporate mana
ID: 395324 • Letter: A
Question
Assume that you recently finished your second-year studies in the corporate management field and have just reported to work as an investment strategist at the brokerage firm of Darwin
Entertainment Services (DES). One of the firm’s clients is Karen Diet, a professional designer who has just come to the Australia from Europe. Karen Diet celebrated her 26th birthday with
a lotto ticket that turned out to be a gift worth millions of dollars. She would like to start a company to produce and market apparel she designs for the entertainment industry and later
invest in real estate. Diet has overheard that in real estate investments, mortgage securitisation could have a negative impact to the financial market.
Your task:
Your boss has developed the following set of questions you must answer (task for this assessment item) to explain the financial system to Karen Diet before she signs a contract with
DES. The structure of the report should be appropriate to your audience, include an executive summary and address each of the following questions:
Question 1
Explain to Karen Diet why corporate finance is important to stakeholders? Describe the organisational forms Diet's intended company might have as it evolves from a start-up to a
major corporation.
Question 2
It is Karen Diet's dream to run a corporation in the future. Discuss how corporations go public and continue to grow. Use relevant examples from the Australian financial system. Discuss
some of the agency problems Diet might encounter and explain how such agency problems can be resolved.
Question 3
Demonstrate to Karen Diet how mortgage securitisation has contributed to the global economic crisis.
Explanation / Answer
Answer: 1
Explanation to Karen Diet why corporate finance is important to stakeholders: The finance is important for the stakeholders because of the following reasons as below
Accurate reporting of finance: The finance department will help to have proper finance management at the organization. The finance management is essential for the organization, as finance will reflect the basic purpose of the business.
Adequate Accounting: The accounting will be carried out by the finance function either it is startup or large organization. The accounting is key for the business and it needs to capture all input credits and debits for the business. Finance will regulate for the adequate accounting in the business.
Finance will declare the revenue, profit and shares for shareholders: It is the finance function which will declare the revenue and profit /loss for the organization. Thus the share of shareholders will be declared by the finance function.
Business investment plans: The finance function will be able to execute adequate investment planning for the business so that it can invest for business in right direction. This will facilitate the stakeholders.
The organizational forms Diet's intended company might have as it evolves from a start-up to a major corporation as below
It will have key functions like finance, production, marketing, IT and R&D so that the basic business processes can be executed in the required direction.
The infrastructure should be supported in the long term direction so that the business can easily acquire the growth plan.
The lean system and tools should be applied in the business process so that better efficiency and effectiveness can be achieved.