Investors And Other Stakeholders

Question 1

Financial leverage

Answer 1

Increase in roe due to increase in debt as return on asset is more than the cost of debt

Question 2

Shareholder theory.

Answer 2

Primary focus of corporate governance is Increase in market value of the firm’s common equity and is concerned with the conflict of interest between the firms managers and its owners

Question 3

Stakeholder theory.

Answer 3

It considers conflicts among several groups that have an interest in activities and performance firm.

Question 4

Covenants

Answer 4

Terms or agreement., private debt holders control using contenants or agreements

Question 5

Stake holders of a corporation.

Answer 5

1. Lenders / creditors ‘
2. Board of directors
3. Shareholders
4. Employees
5. Suppliers
6. Customers
7. Governments

Question 6

Board of directors

Answer 6

Two types:
1. One tier - where both. Independent and inside directors serve on a single board
2. two tier - independent directors serves as itu supervisory board and inside directors serves as the management board

Question 7

Staggered board

Answer 7

In this type of board only few directors are changed annually. This avoids major overhaul of the board

Question 8

Stranded asset

Answer 8

Assets that become non- useful due to transitions.