Question

Corporate finance, capital markets, and investments

Finance professionals make decisions that fall into three distinctive areas: corporate finance, capital markets, and investments. Below is a set of decisions made by finance professionals. Categorize the decisions according to the area of finance to which they belong.

Decision	Corporate Finance	Capital Markets	Investments
Andrew, the chief executive officer (CEO) of ABC Corp., must make decisions that help achieve the primary goal of the corporation: maximize shareholders’ wealth.
Rafael, a trader at the New York Stock Exchange (NYSE), executes the decisions made by investors and takes action based on requests by different buyers and sellers in the market.
Caesar works for a financial advising firm. He must create a financial plan and come up with a list of securities in which his client can invest. Caesar must make decisions regarding the investments that he should recommend to his clients to include in their portfolio.

Answer 1

Andrew, the chief executive officer (CEO) of ABC Corp., must make decisions that help achieve the primary goal of the corporation: maximize shareholders’ wealth. ---> This is corporate finance because corporate finance deals with maximizing shareholder wealth.

Rafael, a trader at the New York Stock Exchange (NYSE), executes the decisions made by investors and takes action based on requests by different buyers and sellers in the market. ---> This is capital markets because capital markets are where investors and firms interact by exchanging long-term securities such as stocks and bonds.

Caesar works for a financial advising firm. He must create a financial plan and come up with a list of securities in which his client can invest. Caesar must make decisions regarding the investments that he should recommend to his clients to include in their portfolio. ---> This is investments because Caesar is advising the client on their investments.