The term ‘principal-agent relationship’ or simply just ‘agency relationship’ is used to describe an arrangement where one entity, the principal, legally appoints another entity, the agent, to act on its behalf by providing a service or performing a particular task….

Corporate governance may be defined as the system of internal controls, processes, and procedures by which a company is managed, directed, or controlled. Weak corporate governance practices have resulted in the failures of many companies. Shareholder and Stakeholder Theories Corporate…

A firm’s financing needs and risk profile depend on its business models and other factors. These factors can be classified into external and firm-specific factors. External Factors Economic conditions: Macroeconomic variables such as GDP growth, exchange rates, interest rates, inflation,…

A business model outlines how a business is organized to deliver value to its customers. A business model encompasses the following aspects: Target customers of the business. Supporting logic of the business. How the business serves its customers. Important assets…

A corporation can either be regarded as private or public. This classification is determined by the following factors: Issuance of shares. Exchange listing and share transfer. Registration and disclosure requirements. 1. Issuance of Shares Public Companies Public companies may issue…

A business is initiated by a founder(s) who possesses significant know-how or expertise. The founder may, nevertheless, lack the skills to manage the business as it grows. Moreover, the founders may lack the capital to grow their business. They may,…

Risk can be defined in several ways. However, one fairly simple definition is that “risk refers to the uncertainty of a return and the potential for financial loss.” Risk can arise from financing and operating activities and can be classified…