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5 pages/β‰ˆ1375 words
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
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Topic:

Financial Management. The meaning of Agency Relationship and Case Study Analysis

Coursework Instructions:

Homework Set #3
Due Week 6 and worth 75 points
Directions: Answer the following questions in a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.
MINI CASE
Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial client base is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these plans in mind, you need to answer for yourself, and potential investors, the following questions:
What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist? Explain your answer.
Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate the agency costs?
What is corporate governance? List five corporate governance provisions that are internal to a firm and are under its control.
Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?
Briefly explain how regulatory agencies and legal systems affect corporate governance.
Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills.

Coursework Sample Content Preview:

Mini Case Study
Name
Institution
Course
Date
MINI CASE STUDY
Question 1.
The meaning of Agency Relationship and Case Study Analysis
An agency relationship is a category of a fiduciary relationship. In an agency relationship, one individual is the principal while the other party is the agent. The agent act on behalf of the principal. The principal acts under the obligations of the agent (P, 2015). When it comes to the case that is given above, whereby I am the only worker and my money is used to invest in some operations, I think since there are no parties involved in the operation, there would be no agency conflicts. An agency conflict is a type of conflict that arises when one party is supposed to act in the best interest of the other party (Mulford & Comiskey, 2011). In this scenario, I am the only person who is involved in the operation, there is no agent and that is why there will be no agency conflicts.
Question 2
The meaning of agency costs and how they can be mitigated
An agency cost that might occur in this kind of scenario, the agency cost is the cost rotating around the reimbursement of extra dividends to the existing stakeholders. Additionally, it is critical to comprehend that agency costs may involve the internal company expenses that arises from the acts and activities of an agent who is acting on behalf of the company. Therefore, it is critical to comprehend that agency costs may occur as a result of incapability, disruptions as conflicts of interests between the management of the organization and the shareholders. Furthermore, the agency cost could increase when increasing reserves of the external lenders (Brigham & Daves, 2013). This is because the shareholders can agree to share the possession of the business. To mitigate this kind of agency cost, good perquisites should be paid to the managers. The stakeholders should be paid their dividends. Besides, developing effective systems and structure in the organization may help in managing and reducing the agency costs, for instance, effective compensation structures should determine how managers should be paid. This would help in reducing unnecessary costs and facilitate the efforts aimed at maximizing shareholders’ investments.
Question 3
The meaning of corporate governance and the five provisions of corporate governance
Corporate governance can be termed as the amalgamation of rules, acts, and processes in which businesses are controlled, operated, and planned. Additionally, corporate governance is aimed at balancing between the interest of the organization and those of shareholders who may include senior executives, community, and suppliers, government and...
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