Question

hat is Finance? What is the relationship between economics and finance? Who owns a corporation? What is the agency problem? What is the objective of a firm and its constraints? Who is controlling firms? What are Business Ethics? What is a financial market and what types of changes have financial markets experienced during the last three decades? Is our financial market an efficient one? What are the components of interest rates and how monetary policy can change them? What are the information that the shape of a yield curve can give to us?

Answer 1

As per policy, only four parts of a question are allowed to answer, so we are answering first five :

1)Finance is the field where projects are been funded keeping in view the least cost of financing under the given uncertainty and risk.

2)The economics brings the finance in the economy at the macro level and the finance brings economy in the business at the micro level. The production in the economy at lowest cost and within the resources available, whereas finance brings economy funding to the projects.

3)The equity shareholders are the legal owner of the corporation.

4)In a corporate,  the agency problem exists between the management and shareholders of the company due to conflict of interest between them.

5)The objective for the difference purpose is different like:

For people : The maximisation of the fulfilment of the needs.

For firms : The maximisation of profit and satisfaction of shareholders and employees.

For governments : Proper governanace and budgeting and peace economy structure.

The constraints are the limits on “how we achieve objectives”, which are :

• The physical availability of the resources and their management
• The limited sources of finance and budget constraint.
• The legal constraint to control and operate the business.