CH 1. Foundations of Finance, Ninth edition; Written by Keown, Martin and Petty

The long-run goal of the firm is to- Maximize shareholder wealth.
Maximizing shareholder wealth means maximizing the- Market value of the firm’s common stock.
Advantage of the corporation include- * Transferability of ownership.* Ability of the corporation to raise capital.
Disadvantage of partnership are- * Lack of performance. * Unlimited liability.
According to principle 3, how should investors decide where to invest their money? By determining if the return is more than expected given the level of risk.
Why is it so hard to find extremely profitable projects? * If an industry is generating large profits, then new entrants are attracted, driving down profits. * To find profit projects, the product or service must be differentiated and/or have a cost advantage over the competition. *To find high profit projects, you must locate imperfections in the market that are not currently being taken advantage of.

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