Question

For this submission, you will write a response to the following scenario:

Imagine that you have completed an internship in the finance division of a technology corporation. Your boss, the financial manager, is considering hiring you for a full-time job. He first wants to evaluate your financial knowledge and has provided you with a short examination. When composing your answers to this employment examination, ensure that they are cohesive and read like a short essay.

 Analyze the roles and responsibilities of financial managers in confirming compliance with federal and shareholder requirements  Differentiate between various financial markets and institutions by comparing and contrasting options when selecting appropriate private and corporate investments

Your submission must address the following critical elements: I. Analyze Roles and Responsibilities for Compliance A. Examine the types of decisions financial managers make. How are these decisions related to the primary objective of financial managers? B. Analyze the various ethical issues a financial manager could potentially face and how these could be handled. C. Compare and contrast the different federal safeguards that are in place to reduce financial reporting abuse. Why are these considered appropriate safeguards? II. Investment Options A. If a private company is “going public,” what does this mean, and how would the company do this? What are the advantages of doing this? Do you see any disadvantages? If so, what are they? B. How do the largest U.S. stock markets differ? Out of those choices, which would be the smartest private investment option, in your opinion? Why? C. Compare and contrast the various investment products that are available and the types of institutions that sell them.

: Ensure that your employment examination is submitted as one comprehensive and cohesive short essay. It should use double spacing, 12-point Times New Roman font, and one-inch margins. Citations should be formatted according to APA style.

Answer 1

I Analyze Roles and Responsibilities for Compliance

A. The main decisions that are to taken by any financial manager are –

1. Investment Decisions – It includes Capital Budgeting decisions. It deals with efficient utilization of the organisation’s funds and selecting the assets/projects which brings maximum benefit to the organisation.

2. Financing Decisions – It involves the decisions regarding from where an organisation will get funds and how. The financial manager compares the various sources of obtaining funds and then choosing the option with the minimum cost.

3. Dividends decisions – It deals with the questions such as – will dividend be distributed this year? How much dividend should be distributed?

The primary objective of the financial manager is to maximize the firm’s value. This is achieved by the financial managers by taking crucial decisions on the daily basis. The investment decisions, financing decisions and dividend decisions help to achieve this objective. As all of these decisions are in alignment with the firm’s long term objectives.

B. Some of the ethical issues faced by financial managers are-

1. Integrity – Not using the confidential financial information for personal gains. For eg – Not participating in Insider trading

2. Reporting anyone to the higher level of management who does not comply with the code of ethics.

3. IN case, top level management is involved in malicious activities then reporting to the external auditors about such acts.

C. Different federal safeguards that are in place to reduce financial reporting abuse are -

1. Sarbanes-Oxley Act, SOX holds the top level management responsible for the accuracy and completeness of the financial statements. This has hugely impacted the business world as now the top level management is directly answerable in case of any discrepancy.

II INVESTMENT OPTIONS

A. A private company going “Public” means that now anyone can buy its share on the stock exchange. These companies are now called public businesses. A private company usually goes public to increase its capital to expand its business.

A private company goes public by issuing Initial Public Offer (IPO) to the general public. For issuing an IPO, a private company can also appoint an underwriter.

Some of the advantages of going public are –

1. It helps to increase the funds of the business thereby, supporting the expansion of the business.

2. Stock options are offered to the employees as incentives and compensation.

3. The shares are traded at a higher price thereby, increasing the goodwill of the business.

4. An IPO leads to a lot of publicity of the company.

5. Also, many venture-capitalists use the IPO as an exit strategy for themselves.

            Some of the disadvantages of going public are –

1. More compliances and regulations have to be followed by public businesses. For eample – Compliances of Sarbanes Oxley Act (SOX)

2. Securities and Exchange Commission (SEC) requires disclosure of financial information continuously to the general public.

3. IT leads to increase in cost as there will be some expenditure for complying the incremental regulations. For eg- Salaries of new employees specifically appointed to ensure compliance of SEC, SOX.

4. An IPO is an expensive affair.

5. Regular audit of the financial statements of the company.

B. The difference between New York Stock Exchange(NYSE) and NASDAQ-

Difference	NASDAQ	NYSE
Acronym	National Association for Stock Dealers Automated Quotations	New York Stock Exchange
Market Type	Dealer based Security Market Here, dealers sell securities directly to the investors or firms via telephone or internet.	Auction Style Security Market Here, brokers purchase stock on behalf of their clients or firms.
Trading Location	Trading takes place electronically (internet).	Trading takes place as the floor of the stock exchange itself.

According to me, the company should choose NASDAQ for their IPO as the entry listing fees for stock listing and yearly listing fee is comparatively low. So, the companies which do not require a huge level of credibility which comes from listing under NYSE should choose NASDAQ due to the cost benefit.

C. Various Investment products available are –

1. Bonds – They are issued by companies or government. Bonds have comparatively low risk. The investor receives fixed interest in regular instalments.

2. Stocks – One can purchase stocks of a company. It is risky than other investments as there is rarely any fixed amount that is given to the stockholders. However, some companies give dividend to the stockholders.

3. Mutual Funds – There are various mutual funds schemes available which allow the investor to purchase a large number of investments in a single transaction. It likes purchasing a diverse portfolio of stocks and bonds.