Assume that you recently graduated and have just reported to work as an investment advisor at…

Assume that you recently graduated and have just reported to
work as an investment advisor at the brokerage firm of Balik and
Kiefer Inc. One of the firms clients is Michelle DellaTorre, a
professional tennis player who has just come to the United States
from Chile. DellaTorre 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
Balik and Kiefer. DellaTorre 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 DellaTorre. 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 firms 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 dealer-broker networks, alternative trading
systems, and registered stock exchanges. Briefly explain mortgage
securitization and how it contributed to the global economic
crisis.