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Flashcard 1636647701772

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#reading-8-statistical-concepts-and-market-returns
Question
The mean is lower than the median in [...] distributions
Answer
negatively skewed

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Subject 4. Measures of Center Tendency
and so on. For n = 2, the harmonic mean is related to arithmetic mean A and geometric mean G by: The mean, median, and mode are equal in symmetric distributions. <span>The mean is higher than the median in positively skewed distributions and lower than the median in negatively skewed distributions. Extreme values affect the value of the mean, while the median is less affected by outliers. Mode helps to identify shape and skewness of distribution.<span><body><html>







Flashcard 1641090256140

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#reading-8-statistical-concepts-and-market-returns
Question
In the context of portfolios, a positive weight represents an [...] and a negative weight represents an [...]
Answer
asset held long

asset held short.

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Flashcard 1732487023884

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#sprectral-theorem #stochastics
Question

the Karhunen–Loève theorem represents a stochastic process as [...]

Answer
an infinite linear combination of orthogonal functions

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p to: navigation, search In the theory of stochastic processes, the Karhunen–Loève theorem (named after Kari Karhunen and Michel Loève), also known as the Kosambi–Karhunen–Loève theorem [1] [2] is a representation of a stochastic process as <span>an infinite linear combination of orthogonal functions, analogous to a Fourier series representation of a function on a bounded interval. <span><body><html>

Original toplevel document

Karhunen–Loève theorem - Wikipedia
Karhunen–Loève theorem - Wikipedia Karhunen–Loève theorem From Wikipedia, the free encyclopedia (Redirected from Karhunen–Loeve expansion) Jump to: navigation, search In the theory of stochastic processes, the Karhunen–Loève theorem (named after Kari Karhunen and Michel Loève), also known as the Kosambi–Karhunen–Loève theorem [1] [2] is a representation of a stochastic process as an infinite linear combination of orthogonal functions, analogous to a Fourier series representation of a function on a bounded interval. The transformation is also known as Hotelling Transform and Eigenvector Transform, and is closely related to Principal Component Analysis (PCA) technique widely used in image processing








Reading 40  Risk Management: An Introduction (Intro)
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This reading will focus on economic and financial risk as it relates to investment management.

All businesses and investors manage risk in the choices they make, even if not conciously. Business and investing are about allocating resources and capital to chosen risks. In their decision process, businesses and investors may take steps to avoid some risks, pursue the risks that provide the highest rewards, and measure and mitigate their exposure to these risks as necessary. Risk management processes and tools make difficult business and financial problems easier to address. Risk is not just a matter of fate; it can be actively controled with decisions, within a risk management framework. Risk is an integral part of the business or investment process. Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk but requires that risk be managed optimally. Proper identification and measurement of risk, and keeping risks aligned with the goals of the enterprise, are key factors in managing businesses and investments. Good risk management results in a higher chance of a preferred outcome—more value for the company or portfolio or more utility for the individual.

Portfolio managers need to be familiar with risk management not only to improve the portfolio’s risk–return outcome, but also because of two other ways in which they use risk management at an enterprise level. First, they help to manage their own companies that have their own enterprise risk issues. Second, many portfolio assets are claims on companies that have risks. Portfolio managers need to evaluate the companies’ risks and how those companies are addressing them.

This reading takes talks about the risk management of enterprises in general and portfolio risk management. The principles underlying portfolio risk management are generally applicable to the risk management of financial and non-financial institutions as well.

The concept of risk management applies to individuals. Although many large entities formally practice risk management, most individuals practice it informally and disorderly, oftentimes responding to risk events after they occur, and they ignore more subtle risks often. Many individuals simply do not view risk management as a formal, systematic process that would help them achieve not only their financial goals but also the ultimate end result of happiness, or maximum utility as economists like to call it, but they should.

Although the primary focus of this reading is on institutions, we will also cover risk management as it applies to individuals. We will show that many common themes underlie risk management—themes that are applicable to both organizations and individuals.

Although often viewed as defensive, risk management is a valuable offensive weapon in the manager’s arsenal. In the quest for preferred outcomes, such as higher profit, returns, or share price, management does not usually get to choose the outcomes but does choose the risks it takes in pursuit of those outcomes. The choice of which risks to undertake through the allocation of its scarce resources is the key tool available to management. An organization with a comprehensive risk management culture in place, in which risk is integral to every key strategy and decision, should perform better in the long-term, in good times and bad, as a result of better decision making.

The fact that all businesses and investors engage in risky activities (i.e., activities with uncertain outcomes) raises a number of important questions. The questions that this reading will address include the following:

  • What is risk management, and why is it important?

  • What risks does an organization (or individual) face in pursuing its objectives?

  • How are an entity’s goals affected by risk, an

...
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Reading 40  Risk Management: An Introduction Intro
Risk—and risk management—is an inescapable part of economic activity. People generally manage their affairs in order to be as happy and secure as their environment and resources will allow. But regardless of how carefully these affairs are managed, there is risk because the outcome, whether good or bad, is seldom predictable with complete certainty. There is risk inherent in nearly everything we do, but this reading will focus on economic and financial risk, particularly as it relates to investment management. All businesses and investors manage risk, whether consciously or not, in the choices they make. At its core, business and investing are about allocating resources and capital to chosen risks. In their decision process, within an environment of uncertainty, these entities may take steps to avoid some risks, pursue the risks that provide the highest rewards, and measure and mitigate their exposure to these risks as necessary. Risk management processes and tools make difficult business and financial problems easier to address in an uncertain world. Risk is not just a matter of fate; it is something that organizations can actively control with their decisions, within a risk management framework. Risk is an integral part of the business or investment process. Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk but requires that risk be managed optimally. Proper identification and measurement of risk, and keeping risks aligned with the goals of the enterprise, are key factors in managing businesses and investments. Good risk management results in a higher chance of a preferred outcome—more value for the company or portfolio or more utility for the individual. Portfolio managers need to be familiar with risk management not only to improve the portfolio’s risk–return outcome, but also because of two other ways in which they use risk management at an enterprise level. First, they help to manage their own companies that have their own enterprise risk issues. Second, many portfolio assets are claims on companies that have risks. Portfolio managers need to evaluate the companies’ risks and how those companies are addressing them. This reading takes a broad approach that addresses both the risk management of enterprises in general and portfolio risk management. The principles underlying portfolio risk management are generally applicable to the risk management of financial and non-financial institutions as well. The concept of risk management is also relevant to individuals. Although many large entities formally practice risk management, most individuals practice it more informally and some practice it haphazardly, oftentimes responding to risk events after they occur. Although many individuals do take reasonable precautions against unwanted risks, these precautions are often against obvious risks, such as sticking a wet hand into an electrical socket or swallowing poison. The more subtle risks are often ignored. Many individuals simply do not view risk management as a formal, systematic process that would help them achieve not only their financial goals but also the ultimate end result of happiness, or maximum utility as economists like to call it, but they should. Although the primary focus of this reading is on institutions, we will also cover risk management as it applies to individuals. We will show that many common themes underlie risk management—themes that are applicable to both organizations and individuals. Although often viewed as defensive, risk management is a valuable offensive weapon in the manager’s arsenal. In the quest for preferred outcomes, such as higher profit, returns, or share price, management does not usually get to choose the outcomes but does choose the risks it takes in pursuit of those outcomes. The choice of which risks to undertake through the allocation of its scarce resources is the key tool available to management. An organization with a comprehensive risk management culture in place, in which risk is integral to every key strategy and decision, should perform better in the long-term, in good times and bad, as a result of better decision making. The fact that all businesses and investors engage in risky activities (i.e., activities with uncertain outcomes) raises a number of important questions. The questions that this reading will address include the following: What is risk management, and why is it important? What risks does an organization (or individual) face in pursuing its objectives? How are an entity’s goals affected by risk, and how does it make risk management decisions to produce better results? How does risk governance guide the risk management process and risk budgeting to integrate an organization’s goals with its activities? How does an organization measure and evaluate the risks it faces, and what tools does it have to address these risks? The answers to these questions collectively help to define the process of risk management. This reading is organized along the lines of these questions. Section 2 describes the risk management process, and Section 3 discusses risk governance and risk tolerance. Section 4 cove




Flashcard 1741134630156

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#measure-theory #stochastics
Question
E gives expectations of random variables, so it is a function \( X \mapsto E(X) \) that maps [...] to [...]
Answer
random variables to real numbers.

Since the E operator operates on random variables, it's a function of functions; that is, it's a function that takes functions as input.

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E gives expectations of random variables, so it is a function X↦E(X) that maps random variables to real numbers.

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Flashcard 1741142494476

Tags
#measure-theory #stochastics
Question
The smallest sigma-algebra is [...].
Answer
{∅, Ω}

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The smallest sigma-algebra is {∅, Ω}. It must contain Ω by definition, and it must contain ∅ because it is Ω c . Unions and intersections of Ω and ∅ give us the same sets back, no new sets.

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Flashcard 1741164514572

Tags
#measure-theory #stochastics
Question
Lebesgue measure for a set A on R corresponds to [...] of ordinary calculus
Answer
dx

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#has-images #puerquito-session #reading-puerquito-verde
Weak corporate governance is a common thread found in many company failures. A lack of proper oversight by the board of directors, inadequate protection for minority shareholders, and incentives at companies that promote excessive risk taking are just a few of the examples that can be problematic for a company.
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Introduction
Weak corporate governance is a common thread found in many company failures. A lack of proper oversight by the board of directors, inadequate protection for minority shareholders, and incentives at companies that promote excessive risk taking are just a few of the examples that can be problematic for a company. In response to company failures, regulations have been introduced to promote stronger governance practices and protect financial markets and investors. Academics, policy maker




#puerquito-session #reading-puerquito-verde
In response to company failures, regulations have been introduced to promote stronger governance
practices and protect financial markets and investors. Academics, policy makers, and other groups have
published numerous works discussing the benefits of good corporate governance and identifying core
corporate governance principles believed to be essential to ensuring sound capital markets and the stability of the financial system.
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Introduction
per oversight by the board of directors, inadequate protection for minority shareholders, and incentives at companies that promote excessive risk taking are just a few of the examples that can be problematic for a company. <span>In response to company failures, regulations have been introduced to promote stronger governance practices and protect financial markets and investors. Academics, policy makers, and other groups have published numerous works discussing the benefits of good corporate governance and identifying core corporate governance principles believed to be essential to ensuring sound capital markets and the stability of the financial system. The assessment of a company’s corporate governance system, including consideration of conflicts of interest and transparency of operations, has increasingly become an essentia





Corporate Governance Overview
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Corporate governance can be defined as: “the system of internal controls and procedures by which individual companies are managed. It provides a framework that defines the rights, roles and responsibilities of various groups . . . within an organization. At its core, corporate governance is the arrangement of checks, balances, and incentives a company needs in order to minimize and manage the conflicting interests between insiders and external shareowners.”
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Flashcard 1741696142604

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#has-images



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Flashcard 1741700861196

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#has-images


Question
tell prime no.s

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Flashcard 1741704793356

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#has-images


Question
tell prime no.s

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Flashcard 1741711871244

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#has-images
Question
tell prime no.s



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Flashcard 1741722619148

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#has-images #reading-puerquito-verde
Question
The primary stakeholder groups of a corporation consist of:


Answer
1. shareholders,
2. creditors,
3. managers (or executives),
4. other employees,
5. board of directors,
6. customers,
7. suppliers, and
8. governments/regulators (and, by extension, affected individuals and community
groups).

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Flashcard 1741726813452

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#has-images #reading-puerquito-verde
Question
The main shareholders interest is:


Answer
Shareholder interests are typically focused on growth in corporate profitability that maximizes the value of a company’s equity.

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#puerquito-session #reading-puerquito-verde
3.1.2 Creditors

Creditors, most commonly bondholders and banks, are a company’s lenders and the
providers of debt financing. Creditors do not hold voting power (unlike common
shareholders) and typically have limited influence over a company’s operations.

3.1.3 Managers and Employees

Senior executives and other high level managers are normally compensated through salary, bonuses, equity based remuneration (or compensation). As a result, managers may be motivated to maximize the value of their total
remuneration while also protecting their employment positions.

3.1.4 Board of Directors

A company’s board of directors is elected by shareholders to protect shareholders’ interests, provide strategic direction, and monitor company and management performance.

3.1.5 Customers
Customers expect a company’s products or services to satisfy their needs and
provide appropriate benefits given the price paid, as well as to meet applicable
standards of safety.

Compared with other stakeholder groups, customers tend to be less concerned with,
and affected by, a company’s financial performance.

3.1.6 Suppliers
A company’s suppliers have a primary interest in being paid as contracted or agreed
on, and in a timely manner, for products or services delivered to the company.

Suppliers, like creditors, are concerned with a company’s ability to generate
sufficient cash flows to meet its financial obligations.

3.1.7 Governments/Regulators

Governments and regulators seek to protect the interests of the general public and
ensure the well being of their nations’ economies.

As the collector of tax revenues, a government can also be considered one of the
company’s major stakeholders
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3.2 Principal Agent and Other Relationships in Corporate Governance
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A principal agent relationship (also known as an agency relationship) is created when a principal hires an agent to perform a particular task or service.

The principal agent relationship involves obligations, trust, and expectations of loyalty; the agent is expected to act in the best interests of the principal. In a company, principal agent relationships often lead to conflicts for example, when managers (as agents) do not act in the best interests of shareholders (as principals).
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#linear-algebra
The formula for the dot product of the vectors is \( uv = \|u\| \|v \| \cos θ. \)
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#dot-product
In mathematics, the dot product or scalar product[note 1] is an algebraic operation that takes two equal-length sequences of numbers (usually coordinate vectors) and returns a single number.
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Dot product - Wikipedia
ia Jump to: navigation, search "Scalar product" redirects here. For the abstract scalar product, see Inner product space. For the product of a vector and a scalar, see Scalar multiplication. <span>In mathematics, the dot product or scalar product [note 1] is an algebraic operation that takes two equal-length sequences of numbers (usually coordinate vectors) and returns a single number. In Euclidean geometry, the dot product of the Cartesian coordinates of two vectors is widely used and often called inner product (or rarely projection product); see also inner product s




#dot-product

if a and b are orthogonal, then the angle between them is 90° and

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Dot product - Wikipedia
‖ cos ⁡ ( θ ) , {\displaystyle \mathbf {a} \cdot \mathbf {b} =\|\mathbf {a} \|\ \|\mathbf {b} \|\cos(\theta ),} where θ is the angle between a and b. In particular, <span>if a and b are orthogonal, then the angle between them is 90° and a ⋅ b = 0. {\displaystyle \mathbf {a} \cdot \mathbf {b} =0.} At the other extreme, if they are codirectional, then the angle between them is 0° and a ⋅ b




#linear-algebra
In mathematics and vector algebra, the cross product or vector product (occasionally directed area product to emphasize the geometric significance) is a binary operation on two vectors in three-dimensional space (R3) and is denoted by the symbol ×. Given two linearly independent vectors a and b, the cross product, a × b, is a vector that is perpendicular to both a and b and thus normal to the plane containing them.
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Cross product - Wikipedia
edia, the free encyclopedia Jump to: navigation, search This article is about the cross product of two vectors in three-dimensional Euclidean space. For other uses, see Cross product (disambiguation). <span>In mathematics and vector algebra, the cross product or vector product (occasionally directed area product to emphasize the geometric significance) is a binary operation on two vectors in three-dimensional space (R 3 ) and is denoted by the symbol ×. Given two linearly independent vectors a and b, the cross product, a × b, is a vector that is perpendicular to both a and b and thus normal to the plane containing them. It has many applications in mathematics, physics, engineering, and computer programming. It should not be confused with dot product (projection product). If two vectors have the same




#functional-analysis
In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero.
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Support (mathematics) - Wikipedia
eds additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2009) (Learn how and when to remove this template message) <span>In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero. If the domain of f is a topological space, the support of f is instead defined as the smallest closed set containing all points not mapped to zero. This concept is used very widely in m




Flashcard 1741820923148

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#functional-analysis
Question
In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are [...]
Answer
not mapped to zero.

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In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero.

Original toplevel document

Support (mathematics) - Wikipedia
eds additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2009) (Learn how and when to remove this template message) <span>In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero. If the domain of f is a topological space, the support of f is instead defined as the smallest closed set containing all points not mapped to zero. This concept is used very widely in m







Flashcard 1741822496012

Tags
#functional-analysis
Question
In mathematics, the [...] of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero.
Answer
support

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In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero.

Original toplevel document

Support (mathematics) - Wikipedia
eds additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2009) (Learn how and when to remove this template message) <span>In mathematics, the support of a real-valued function f is the subset of the domain containing those elements which are not mapped to zero. If the domain of f is a topological space, the support of f is instead defined as the smallest closed set containing all points not mapped to zero. This concept is used very widely in m







#calculus
Calculus has two major branches,
  1. differential calculus (concerning rates of change and slopes of curves),[2] and
  2. integral calculus (concerning accumulation of quantities and the areas under and between curves).[3]
These two branches are related to each other by the fundamental theorem of calculus.
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Calculus - Wikipedia
small pebble', used for counting and calculations, as on an abacus) [1] is the mathematical study of continuous change, in the same way that geometry is the study of shape and algebra is the study of generalizations of arithmetic operations. <span>It has two major branches, differential calculus (concerning rates of change and slopes of curves), [2] and integral calculus (concerning accumulation of quantities and the areas under and between curves). [3] These two branches are related to each other by the fundamental theorem of calculus. Both branches make use of the fundamental notions of convergence of infinite sequences and infinite series to a well-defined limit. Generally, modern calculus is considered to have been




#calculus-of-variations
Calculus of variations is a field of mathematical analysis that
  1. uses variations, which are small changes in functions and functionals, to
  2. find maxima and minima of functionals, which are mappings from a set of functions to the real numbers.
elementary calculus is about infinitesimally small changes in the values of functions without changes in the function itself, calculus of variations is about infinitesimally small changes in the function itself, which are called variations.
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Calculus of variations - Wikipedia
l Line integral Surface integral Volume integral Jacobian Hessian matrix Specialized[hide] Fractional Malliavin Stochastic Variations Glossary of calculus[show] Glossary of calculus v t e <span>Calculus of variations is a field of mathematical analysis that uses variations, which are small changes in functions and functionals, to find maxima and minima of functionals, which are mappings from a set of functions to the real numbers. [Note 1] Functionals are often expressed as definite integrals involving functions and their derivatives. Functions that maximize or minimize functionals may be found using the Euler–L




#optimal-control
Optimal control deals with the problem of finding a control law for a given system such that a certain optimality criterion is achieved.
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Optimal control - Wikipedia
1 General method 2 Linear quadratic control 3 Numerical methods for optimal control 4 Discrete-time optimal control 5 Examples 5.1 Finite time 6 See also 7 References 8 Further reading 9 External links General method[edit source] <span>Optimal control deals with the problem of finding a control law for a given system such that a certain optimality criterion is achieved. A control problem includes a cost functional that is a function of state and control variables. An optimal control is a set of differential equations describing the paths of the control





Subject 3. Principal-Agent and Other Relationships in Corporate Governance
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Shareholder and Manager/Director Relationships

Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated.
Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders.

  • Managers and shareholders may have different goals. They may also have different attitudes towards risk.

  • Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance.

Controlling and Minority Shareholder Relationships

Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned.

For example, if a company has two classes of common shares (dual classes of common equity):

  • Class A shareholders have all the voting rights.

  • Class B shareholders don't have any voting rights.

The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure.
Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder.

Manager and Board Relationships

This is another example of agency theory (discussed above).

Shareholder versus Creditor Interests

These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like.

Other Stakeholder Conflicts

There are conflicts among other stakeholders, such as those between:

  • customers and shareholders;

  • customers and suppliers;

  • shareholders and government or regulators.

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Shareholder and Manager/Director Relationships
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Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated.
Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders.

  • Managers and shareholders may have different goals. They may also have different attitudes towards risk.

  • Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance.

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Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin




Flashcard 1742438796556

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Question
The [...] is the person delegating authority, and the [...] is the person to whom the authority is delegated.
Answer
principal

agent

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Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have

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Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin







Flashcard 1742441417996

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Question
Managers and shareholders may have different attitudes towards [...]
Answer
risk.

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person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. <span>Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin







Flashcard 1742443777292

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Question
Who has more information, Managers or Shareholders?
Answer
Managers almost always have more information than shareholders

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y managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. <span>Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. <span><body><html>

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin








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Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance.
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a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. <span>Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. <span><body><html>

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin




Flashcard 1742447971596

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Question
[...] offers a way to understand why managers do not always act in the best interests of stakeholders.


Answer
Agency theory

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Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. <span>Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers a

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin








Controlling and Minority Shareholder Relationships
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Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned.

For example, if a company has two classes of common shares (dual classes of common equity):

  • Class A shareholders have all the voting rights.

  • Class B shareholders don't have any voting rights.

The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure.
Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder.

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Subject 3. Principal-Agent and Other Relationships in Corporate Governance
; Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. <span>Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned. For example, if a company has two classes of common shares (dual classes of common equity): Class A shareholders have all the voting rights. Class B shareholders don't have any voting rights. The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure. Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests The





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Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders.
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Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned. For example, if a company has two classes of common shares (dual classes of common equity): &#

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
; Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. <span>Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned. For example, if a company has two classes of common shares (dual classes of common equity): Class A shareholders have all the voting rights. Class B shareholders don't have any voting rights. The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure. Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests The




Flashcard 1742457146636

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#has-images #puerquito-session #reading-puerquito-verde


Question
Controlling shareholders may receive special attention from [...] .
Answer
management

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focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure. Minority shareholders have less influence on the board composition than controlling shareholders. <span>Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span><body><html>

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
; Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. <span>Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controlling shareholders, separation of ownership and control generates a two-level agency problem: between controlling shareholders and management and between minority shareholders and controlling shareholders. The interests of controlling and minority shareholders are often not aligned. For example, if a company has two classes of common shares (dual classes of common equity): Class A shareholders have all the voting rights. Class B shareholders don't have any voting rights. The management team and the board are more likely to focus on the interests of Class A shareholders. The rights of Class B shareholders may suffer as a consequence of the ownership structure. Minority shareholders have less influence on the board composition than controlling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests The







Manager and Board Relationships
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This is another example of agency theory (discussed above).

Shareholder versus Creditor Interests

These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like.

Other Stakeholder Conflicts

There are conflicts among other stakeholders, such as those between:

  • customers and shareholders;

  • customers and suppliers;

  • shareholders and government or regulators.

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Subject 3. Principal-Agent and Other Relationships in Corporate Governance
ontrolling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span>Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>





Shareholder versus Creditor Interests
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These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like.

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This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders;

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
ontrolling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span>Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>





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Shareholders also prefer that the company pay more out in dividends than creditors would like.
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different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. <span>Shareholders also prefer that the company pay more out in dividends than creditors would like. <span><body><html>

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
ontrolling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span>Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>





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These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back.
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These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like.

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
ontrolling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span>Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>




Other Stakeholder Conflicts
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There are conflicts among other stakeholders, such as those between: customers and shareholders customers and suppliers shareholders and government or regulators.
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cts than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. <span>Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>

Original toplevel document

Subject 3. Principal-Agent and Other Relationships in Corporate Governance
ontrolling shareholders. Controlling shareholders may receive special attention from management. They are often in the position to facilitate third-party takeovers by splitting the large gains on their own shares with the bidder. <span>Manager and Board Relationships This is another example of agency theory (discussed above). Shareholder versus Creditor Interests These two parties have different relationships to the company, accompanied by different rights and financial returns. For example, shareholders have an incentive to take on riskier projects than creditors do, as creditors are more interested in strategies that will increase the chances of getting their investment back. Shareholders also prefer that the company pay more out in dividends than creditors would like. Other Stakeholder Conflicts There are conflicts among other stakeholders, such as those between: customers and shareholders; customers and suppliers; shareholders and government or regulators. <span><body><html>





Agency Theory
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The agency theory is a supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships due to unaligned goals or different aversion levels to risk. The most common agency relationship in finance occurs between shareholders (principal) and company executives (agents).
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Agency Theory
What is the 'Agency Theory' <span>The agency theory is a supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships due to unaligned goals or different aversion levels to risk. The most common agency relationship in finance occurs between shareholders (principal) and company executives (agents). BREAKING DOWN 'Agency Theory' Agency theory addresses problems that arise due to differences between the goals or desires between the principal and a





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Shareholder Theory

The shareholder theory was originally proposed by Milton Friedman and it states that the sole responsibility of business is to increase profits. It is based on the premise that management are hired as the agent of the shareholders to run the company for their benefit, and therefore they are legally and morally obligated to serve their interests. The only qualification on the rule to make as much money as possible is “conformity to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”

The shareholder theory is now seen as the historic way of doing business with companies realising that there are disadvantages to concentrating solely on the interests of shareholders. A focus on short term strategy and greater risk taking are just two of the inherent dangers involved. The role of shareholder theory can be seen in the demise of corporations such as Enron and Worldcom where continuous pressure on managers to increase returns to shareholders led them to manipulate the company accounts.

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Shareholder &amp; Stakeholder Theories Of Corporate Governance
ined corporate governance as "the system by which companies are directed and controlled." Numerous theories have been proposed on corporate governance best practice, none more popular than the shareholder and stakeholder theories. <span>Shareholder Theory The shareholder theory was originally proposed by Milton Friedman and it states that the sole responsibility of business is to increase profits. It is based on the premise that management are hired as the agent of the shareholders to run the company for their benefit, and therefore they are legally and morally obligated to serve their interests. The only qualification on the rule to make as much money as possible is “conformity to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” The shareholder theory is now seen as the historic way of doing business with companies realising that there are disadvantages to concentrating solely on the interests of shareholders. A focus on short term strategy and greater risk taking are just two of the inherent dangers involved. The role of shareholder theory can be seen in the demise of corporations such as Enron and Worldcom where continuous pressure on managers to increase returns to shareholders led them to manipulate the company accounts. Stakeholder Theory Stakeholder theory, on the other hand, states that a company owes a responsibility to a wider group of stakeholders, other than just shareholders. A stakeholder i





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Stakeholder Theory

Stakeholder theory, contrasting Shareholder Theory, states that a company owes a responsibility to a wider group of stakeholders, other than just shareholders. A stakeholder is defined as any person/group which can affect/be affected by the actions of a business. It includes employees, customers, suppliers, creditors and even the wider community and competitors.

Edward Freeman, the original proposer of the stakeholder theory, recognised it as an important element of Corporate Social Responsibility (CSR), a concept which recognises the responsibilities of corporations in the world today, whether they be economic, legal, ethical or even philanthropic. Nowadays, some of the world’s largest corporations claim to have CSR at the centre of their corporate strategy. Whilst there are many genuine cases of companies with a “conscience”, many others exploit CSR as a good means of PR to improve their image and reputation but ultimately fail to put their words into action

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Shareholder &amp; Stakeholder Theories Of Corporate Governance
ent dangers involved. The role of shareholder theory can be seen in the demise of corporations such as Enron and Worldcom where continuous pressure on managers to increase returns to shareholders led them to manipulate the company accounts. <span>Stakeholder Theory Stakeholder theory, on the other hand, states that a company owes a responsibility to a wider group of stakeholders, other than just shareholders. A stakeholder is defined as any person/group which can affect/be affected by the actions of a business. It includes employees, customers, suppliers, creditors and even the wider community and competitors. Edward Freeman, the original proposer of the stakeholder theory, recognised it as an important element of Corporate Social Responsibility (CSR), a concept which recognises the responsibilities of corporations in the world today, whether they be economic, legal, ethical or even philanthropic. Nowadays, some of the world’s largest corporations claim to have CSR at the centre of their corporate strategy. Whilst there are many genuine cases of companies with a “conscience”, many others exploit CSR as a good means of PR to improve their image and reputation but ultimately fail to put their words into action. Recent controversies surrounding the tax affairs of well known companies such as Starbucks, Google and Facebook in the UK have brought stakeholder theory into the spotlight. Whilst the measures adopted by the companies are legal, they are widely seen as unethical as they are utilising loopholes in the British tax system to pay less corporation tax in the UK. The public reaction to Starbucks tax dealings has led them to pledge £10m in taxes in each of the next two years in an attempt to win back customers. Enlightened Shareholder Value - A Happy Medium? Enlightened shareholder value (ESV) states that “corporations should pursue shareholder wealth with a long-run orientation that seeks





Subject 4. Stakeholder Management
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Subject 4. Stakeholder Management

Stakeholder management involves identifying, prioritizing, and understanding the interests of stakeholder groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure.

Mechanisms of Stakeholder Management

Mechanisms of stakeholder management may include:

• General meetings.

o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members.

o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia.

  • A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company.

  • The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely.

  • Company reporting and transparency. It helps reduce of information asymmetry and agency costs.

  • Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions.

  • Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company?

o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated.

  • Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests.

  • Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees.

  • Contractual agreements with customers and suppliers.

  • Laws and regulations a company must follow to protect the rights of specific groups.

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Stakeholder management involves identifying, prioritizing, and understanding the interests of stakeholder groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure.
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Subject 4. Stakeholder Management
Subject 4. Stakeholder Management Stakeholder management involves identifying, prioritizing, and understanding the interests of stakeholder groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The righ





Mechanisms of Stakeholder Management
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General meetings.

  1. The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members.
  2. Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia.
  • A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company.

  • The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely.

  • Company reporting and transparency. It helps reduce of information asymmetry and agency costs.

  • Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions.

  • Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company?

  1. Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated.
  • Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests.

  • Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees.

  • Contractual agreements with customers and suppliers.

  • Laws and regulations a company must follow to protect the rights of specific groups.

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Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





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General meetings.

  1. The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members.
  2. Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia.
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General meetings. The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors , which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The a

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
A board of directors , which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company.
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ate governance decisions, such as the nomination and election of board members. Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. <span>A board of directors , which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective i

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely.
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ration should be given to votes cast in person or in absentia. A board of directors , which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. <span>The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency . It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions i

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management
Company reporting and transparency . It helps reduce of information asymmetry and agency costs.
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ncial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. <span>Company reporting and transparency . It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so o

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





Related-party transactions.
#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions.
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nancial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency . It helps reduce of information asymmetry and agency costs. <span>Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term perfo

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management
  • Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company?

  1. Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated.
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, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. <span>Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors ; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. &#1

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
Contractual agreements with creditors ; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests.
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plans linked to the long-term performance of the company? Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. <span>Contractual agreements with creditors ; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct , and compliance offer(s) are all means a company can use to manage its relationship with its employees. &

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management
Employee laws, contracts, codes of ethics and business conduct and compliance offer(s) are all means a company can use to manage its relationship with its employees.
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tives employed by the company should be compensated. Contractual agreements with creditors ; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. <span>Employee laws, contracts, codes of ethics and business conduct , and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers . Laws and regulations a company must follow to protect the rights of specific groups. </sp

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
Contractual agreements with customers and suppliers .
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d by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct , and compliance offer(s) are all means a company can use to manage its relationship with its employees. <span>Contractual agreements with customers and suppliers . Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





#has-images #puerquito-session #reading-puerquito-verde #stakeholder-management-mechanisms
Laws and regulations a company must follow to protect the rights of specific groups.
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ws, contracts, codes of ethics and business conduct , and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers . <span>Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>

Original toplevel document

Subject 4. Stakeholder Management
groups and on that basis managing the company's relationships with stakeholders. The framework of corporate governance and stakeholder management reflects a legal, contractual, organizational, and governmental infrastructure. <span>Mechanisms of Stakeholder Management Mechanisms of stakeholder management may include: • General meetings. o The right to participate in general shareholder meetings is a fundamental shareholder right. Shareholders, especially minority shareholders, should have the opportunity to ask questions of the board, to place items on the agenda and to propose resolutions, to vote on major corporate matters and transactions, and to participate in key corporate governance decisions, such as the nomination and election of board members. o Shareholders should be able to vote in person or in absentia, and equal consideration should be given to votes cast in person or in absentia. A board of directors, which serves as a link between shareholders and managers, acts as the shareholders' monitoring tool within the company. The audit function. It plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. Company reporting and transparency. It helps reduce of information asymmetry and agency costs. Related-party transactions. Related-party transactions involve buying, selling, and other transactions with board members, managers, employees, family members, and so on. They can create an inherent conflict of interest. Policies should be established to disclose, mitigate, and manage such transactions. Remuneration policies. Does the company's remuneration strategy reward long-term or short-term growth? Are equity-based compensation plans linked to the long-term performance of the company? o Say on pay is the ability of shareholders in a company to actively vote on how much executives employed by the company should be compensated. Contractual agreements with creditors; indentures, covenants, collaterals and credit committees are tools used by creditors to protect their interests. Employee laws, contracts, codes of ethics and business conduct, and compliance offer(s) are all means a company can use to manage its relationship with its employees. Contractual agreements with customers and suppliers. Laws and regulations a company must follow to protect the rights of specific groups. <span><body><html>





Subject 5. Board of Directors and Committees
#board-of-directors-and-committees #has-images #puerquito-session #reading-puerquito-verde

Composition of the Board of Directors

A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company.

The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions.

Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role.

In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value.

Functions and Responsibilities of the Board
Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the board is to:

  • establish long-term strategic objectives for the company with a goal of ensuring that the best interests of shareholders come first and that the company's obligations to others are met in a timely and complete manner.

  • establish clear lines of responsibility and a strong system of accountability and performance measurement in all phases of a company's operations.

  • hire the chief executive officer, determine the compensation package, and periodically evaluate the officer's performance.

  • ensure that management has supplied the board with sufficient information for it to be fully informed and prepared to make the decision that are its responsibility, and to be able to adequately monitor and oversee the company's management.

Board of Directors Committees

A company's board of directors typically has several committees that are responsible for specific functions and report to the board.

  • The audit committee plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely.

  • The governance committee tries to ensure that the company adopts good corporate governance practices.

  • The remuneration (compensation) committee develops and implements executive compensation policies. Incentives should be provided for actions that boost long-term share profitability and value.

  • The nomination committee searches for and nominates board director candidates, and establishes the nomination policies and procedures.

  • Other common committees include those responsible for overseeing management's activities in certain areas, such

...
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#board-of-directors-and-committees #composition-of-the-bod #has-images #puerquito-session #reading-puerquito-verde

Composition of the Board of Directors

A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company.

The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions.

Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role.

In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value.

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Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the





Functions and Responsibilities of the Board
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Two primary duties of a board of directors are duty of care and duty of loyalty.


Among other responsibilities, the board is to:
  • establish long-term strategic objectives for the company with a goal of ensuring that the best interests of shareholders come first and that the company's obligations to others are met in a timely and complete manner.

  • establish clear lines of responsibility and a strong system of accountability and performance measurement in all phases of a company's operations.

  • hire the chief executive officer, determine the compensation package, and periodically evaluate the officer's performance.

  • ensure that management has supplied the board with sufficient information for it to be fully informed and prepared to make the decision that are its responsibility, and to be able to adequately monitor and oversee the company's management.

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Subject 5. Board of Directors and Committees
maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. <span>Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the board is to: establish long-term strategic objectives for the company with a goal of ensuring that the best interests of shareholders come first and that the company's obligations to others are met in a timely and complete manner. establish clear lines of responsibility and a strong system of accountability and performance measurement in all phases of a company's operations. hire the chief executive officer, determine the compensation package, and periodically evaluate the officer's performance. ensure that management has supplied the board with sufficient information for it to be fully informed and prepared to make the decision that are its responsibility, and to be able to adequately monitor and oversee the company's management. Board of Directors Committees A company's board of directors typically has several committees that are responsible for specific functions and report to





#board-of-directors-and-committees #has-images #puerquito-session #reading-puerquito-verde

Board of Directors Committees

A company's board of directors typically has several committees that are responsible for specific functions and report to the board.

  • The audit committee plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely.

  • The governance committee tries to ensure that the company adopts good corporate governance practices.

  • The remuneration (compensation) committee develops and implements executive compensation policies. Incentives should be provided for actions that boost long-term share profitability and value.

  • The nomination committee searches for and nominates board director candidates, and establishes the nomination policies and procedures.

  • Other common committees include those responsible for overseeing management's activities in certain areas, such as mergers and acquisitions, legal matters, and risk management.

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Subject 5. Board of Directors and Committees
ment has supplied the board with sufficient information for it to be fully informed and prepared to make the decision that are its responsibility, and to be able to adequately monitor and oversee the company's management. <span>Board of Directors Committees A company's board of directors typically has several committees that are responsible for specific functions and report to the board. The audit committee plays a critical role in ensuring the corporation's financial integrity and consideration of legal and compliance issues. The primary objective is to ensure that the financial information reported by the company to shareholders is complete, accurate, reliable, relevant, and timely. The governance committee tries to ensure that the company adopts good corporate governance practices. The remuneration (compensation) committee develops and implements executive compensation policies. Incentives should be provided for actions that boost long-term share profitability and value. The nomination committee searches for and nominates board director candidates, and establishes the nomination policies and procedures. Other common committees include those responsible for overseeing management's activities in certain areas, such as mergers and acquisitions, legal matters, and risk management. <span><body><html>





Subject 6. Factors Affecting Stakeholder Relationships and Corporate Governance
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Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of market and non-market factors.

Market Factors
Shareholder engagement involves a company's interactions with its shareholders. It can provide benefits that include building support against short-term activist investors, countering negative recommendations from proxy advisory firms, and receiving greater support for management's position.

Shareholder activism encompasses a range of strategies that may be used by shareholders seeking to compel a company to act in a desired manner. It can take any of several forms: proxy battles, public campaigns, shareholder resolutions, litigation, and negotiations with management.

Corporate takeovers can happen in different ways: proxy contest or proxy fight, tender offer, hostile takeover, etc. The justification for the use of various anti-takeover defenses should rest on the support of the majority of shareholders and on the demonstration that preservation of the integrity of the company is in the long-term interests of shareholders.

Non-Market Factors

These factors include the legal environment, the media, and the corporate governance industry itself.

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Subject 7. Corporate Governance and Stakeholder Management Risks and Benefits
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From a corporation's perspective, risks of poor governance include:

  • weak control systems or inefficient monitoring tools;

  • ineffective decision making;

  • legal, regulatory, and reputational risks;

  • default and bankruptcy risks.


Benefits of effective governance and stakeholder management include:

  • better operational efficiency and control brought by effective monitoring tools and control mechanisms;

  • better operating and financial performance;

  • lower default risk and cost of debt.

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Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
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Economic Ownership and Voting Control
What is the company's ownership and voting structure among shareholders?
Why do some shareholders own a small portion of a company's stock but get most of the voting power?
Does the practice really insulate managers from Wall Street's short-term mindset?

Dual-class structures create an inferior class of shareholders, and may allow management to make bad decisions with few consequences.

Board of Directors Representation
Analysts should assess whether the experience and skill sets of board members match the needs of the company.
Are they truly independent?
Are there inherent conflicts of interest?

Remuneration and Company Performance
What are the main drivers of the management team's remuneration and incentive structure?
Does the remuneration plan reward long-term or short-term growth?
Is it based on the performance of the company relative to its competitors or other peers?

Equity-based remuneration plans can offer the greatest incentives.
Are they linked to the long-term performance of the company?
What is the impact on the income statement?

Investors in the Company
What is the composition of investors in a company?
Are there any significant investors in the company?
Any sizable affiliated stockholders that can block the votes of the majority?
Any activist shareholders that could bring rapid changes for the company?

Strength of Shareholders' Rights
How robust are the shareholder rights at the company?
How robust compared to those of peers?

Managing Long-Term Risks
How effectively is the company managing long-term risks, such as securing access to necessary resources, managing human capital, exhibiting integrity and leadership, and strengthening the long-term sustainability of the enterprise?

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Subject 9. ESG Considerations for Investors
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ESG integration is the practice of considering environmental, social, and governance factors in the investment process. It can be implemented across all asset classes.

ESG Factors in Investment Analysis
Environmental factors include natural resource management, pollution prevention, water conservation, energy efficiency and reduced emissions, the existence of carbon assets, and adherence to environmental safety and regulatory standards.

Social factors generally pertain to human rights and welfare concerns in the workplace, product development, and, in some cases, community impact.

ESG Implementation Methods
Asset managers and asset owners can incorporate ESG issues into the investment process in a variety of ways.

  • Negative screening is a type of investment strategy that excludes certain companies or sectors from investment consideration because of their underlying business activities or other environmental or social concerns.

  • Positive screening and best-in-class strategies focus on investments with favorable ESG aspects.

  • Thematic investing focuses on a single factor, such as energy efficiency or climate change.

  • Impact investing strategies are targeted investments, typically made in private markets, aimed at solving social or environmental problems.

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#has-images #reading-ferrari #volante-session
It is important to understand how prices of derivatives are determined. Whether one is on the buy side or the sell side, a solid understanding of pricing financial products is critical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value.
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It is important to understand how prices of derivatives are determined. Whether one is on the buy side or the sell side, a solid understanding of pricing financial products is critical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value. Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful

Original toplevel document

Reading 57  Basics of Derivative Pricing and Valuation (Intro)
It is important to understand how prices of derivatives are determined. Whether one is on the buy side or the sell side, a solid understanding of pricing financial products is critical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value. Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful for determining the prices of financial assets. The unique characteristics of derivatives, however, pose some complexities not associated with assets, such as equities and fixed-income instruments. Somewhat surprisingly, however, derivatives also have some simplifying characteristics. For example, as we will see in this reading, in well-functioning derivatives markets the need to determine risk premiums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying. The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered: How does the pricing of the underlying asset affect the pricing of derivatives? How are derivatives priced using the principle of arbitrage? How are the prices and values of forward contracts determined? How are futures contracts priced differently from forward contracts? How are the prices and values of swaps determined? How are the prices and values of European options determined? How does American option pricing differ from European option pricing? This reading is organized as follows. Section 2 explores two related topics, the pricing of the underlying assets on which derivatives are created and the principle





#has-images #reading-ferrari #volante-session
Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful for determining the prices of financial assets. The unique characteristics of derivatives, however, pose some complexities not associated with assets, such as equities and fixed-income instruments. Somewhat surprisingly, however, derivatives also have some simplifying characteristics. For example, as we will see in this reading, in well-functioning derivatives markets the need to determine risk premiums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying.
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itical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value. <span>Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful for determining the prices of financial assets. The unique characteristics of derivatives, however, pose some complexities not associated with assets, such as equities and fixed-income instruments. Somewhat surprisingly, however, derivatives also have some simplifying characteristics. For example, as we will see in this reading, in well-functioning derivatives markets the need to determine risk premiums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying. The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered: How do

Original toplevel document

Reading 57  Basics of Derivative Pricing and Valuation (Intro)
It is important to understand how prices of derivatives are determined. Whether one is on the buy side or the sell side, a solid understanding of pricing financial products is critical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value. Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful for determining the prices of financial assets. The unique characteristics of derivatives, however, pose some complexities not associated with assets, such as equities and fixed-income instruments. Somewhat surprisingly, however, derivatives also have some simplifying characteristics. For example, as we will see in this reading, in well-functioning derivatives markets the need to determine risk premiums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying. The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered: How does the pricing of the underlying asset affect the pricing of derivatives? How are derivatives priced using the principle of arbitrage? How are the prices and values of forward contracts determined? How are futures contracts priced differently from forward contracts? How are the prices and values of swaps determined? How are the prices and values of European options determined? How does American option pricing differ from European option pricing? This reading is organized as follows. Section 2 explores two related topics, the pricing of the underlying assets on which derivatives are created and the principle





#has-images #reading-ferrari #volante-session

The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered:

  • How does the pricing of the underlying asset affect the pricing of derivatives?

  • How are derivatives priced using the principle of arbitrage?

  • How are the prices and values of forward contracts determined?

  • How are futures contracts priced differently from forward contracts?

  • How are the prices and values of swaps determined?

  • How are the prices and values of European options determined?

  • How does American option pricing differ from European option pricing?

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ums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying. <span>The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered: How does the pricing of the underlying asset affect the pricing of derivatives? How are derivatives priced using the principle of arbitrage? How are the prices and values of forward contracts determined? How are futures contracts priced differently from forward contracts? How are the prices and values of swaps determined? How are the prices and values of European options determined? How does American option pricing differ from European option pricing? <span><body><html>

Original toplevel document

Reading 57  Basics of Derivative Pricing and Valuation (Intro)
It is important to understand how prices of derivatives are determined. Whether one is on the buy side or the sell side, a solid understanding of pricing financial products is critical to effective investment decision making. After all, one can hardly determine what to offer or bid for a financial product, or any product for that matter, if one has no idea how its characteristics combine to create value. Understanding the pricing of financial assets is important. Discounted cash flow methods and models, such as the capital asset pricing model and its variations, are useful for determining the prices of financial assets. The unique characteristics of derivatives, however, pose some complexities not associated with assets, such as equities and fixed-income instruments. Somewhat surprisingly, however, derivatives also have some simplifying characteristics. For example, as we will see in this reading, in well-functioning derivatives markets the need to determine risk premiums is obviated by the ability to construct a risk-free hedge. Correspondingly, the need to determine an investor’s risk aversion is irrelevant for derivative pricing, although it is certainly relevant for pricing the underlying. The purpose of this reading is to establish the foundations of derivative pricing on a basic conceptual level. The following topics are covered: How does the pricing of the underlying asset affect the pricing of derivatives? How are derivatives priced using the principle of arbitrage? How are the prices and values of forward contracts determined? How are futures contracts priced differently from forward contracts? How are the prices and values of swaps determined? How are the prices and values of European options determined? How does American option pricing differ from European option pricing? This reading is organized as follows. Section 2 explores two related topics, the pricing of the underlying assets on which derivatives are created and the principle





#has-images #microscopio-session #reading-mano
In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics.
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In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consum

Original toplevel document

Reading 14  Topics in Demand and Supply Analysis
In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms. It is expected that candidates will be familiar with the basic concepts of demand and supply. This material is covered in detail in the recommended prerequisite readings. I





#has-images #microscopio-session #reading-mano
Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms.
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ional income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. <span>Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms. It is expected that candidates will be familiar with the basic concepts of demand and supply. This material is covered in detail in the recommended prerequisite readings.

Original toplevel document

Reading 14  Topics in Demand and Supply Analysis
In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms. It is expected that candidates will be familiar with the basic concepts of demand and supply. This material is covered in detail in the recommended prerequisite readings. I





#globo-terraqueo-session #has-images #reading-globo-terraqueo
Global investors must address two fundamentally interrelated questions: where to invest and in what asset classes? Some countries may be attractive from an equity perspective because of their strong economic growth and the profitability of particular domestic sectors or industries. Other countries may be attractive from a fixed income perspective because of their interest rate environment and price stability. To identify markets that are expected to provide attractive investment opportunities, investors must analyze cross-country differences in such factors as expected GDP growth rates, monetary and fiscal policies, trade policies, and competitiveness. From a longer term perspective investors also need to consider such factors as a country’s stage of economic and financial market development, demographics, quality and quantity of physical and human capital (accumulated education and training of workers), and its area(s) of comparative advantage.
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Global investors must address two fundamentally interrelated questions: where to invest and in what asset classes? Some countries may be attractive from an equity perspective because of their strong economic growth and the profitability of particular domestic sectors or industries. Other countries may be attractive from a fixed income perspective because of their interest rate environment and price stability. To identify markets that are expected to provide attractive investment opportunities, investors must analyze cross-country differences in such factors as expected GDP growth rates, monetary and fiscal policies, trade policies, and competitiveness. From a longer term perspective investors also need to consider such factors as a country’s stage of economic and financial market development, demographics, quality and quantity of physical and human capital (accumulated education and training of workers), and its area(s) of comparative advantage.1 This reading provides a framework for analyzing a country’s trade and capital flows and their economic implications. International trade can facilitate economic growth by

Original toplevel document

Reading 19  International Trade and Capital Flows Introduction
Global investors must address two fundamentally interrelated questions: where to invest and in what asset classes? Some countries may be attractive from an equity perspective because of their strong economic growth and the profitability of particular domestic sectors or industries. Other countries may be attractive from a fixed income perspective because of their interest rate environment and price stability. To identify markets that are expected to provide attractive investment opportunities, investors must analyze cross-country differences in such factors as expected GDP growth rates, monetary and fiscal policies, trade policies, and competitiveness. From a longer term perspective investors also need to consider such factors as a country’s stage of economic and financial market development, demographics, quality and quantity of physical and human capital (accumulated education and training of workers), and its area(s) of comparative advantage.1 This reading provides a framework for analyzing a country’s trade and capital flows and their economic implications. International trade can facilitate economic growth by increasing the efficiency of resource allocation, providing access to larger capital and product markets, and facilitating specialization based on comparative advantage. The flow of financial capital (funds available for investment) between countries with excess savings and those where financial capital is scarce can increase liquidity, raise output, and lower the cost of capital. From an investment perspective, it is important to understand the complex and dynamic nature of international trade and capital flows because investment opportunities are increasingly exposed to the forces of global competition for markets, capital, and ideas. This reading is organized as follows. Section 2 defines basic terminology used in the reading and describes patterns and trends in international trade and capital flows. It also discusses the benefits of international trade, distinguishes between absolute and comparative advantage, and explains two traditional models of comparative advantage. Section 3 describes trade restrictions and their implications and discusses the motivation for, and advantages of, trade agreements. Section 4 describes the balance of payments and Section 5 discusses the function and objectives of international organizations that facilitate trade. A summary of key points and practice problems conclude the reading.





#globo-terraqueo-session #has-images #reading-globo-terraqueo
This reading provides a framework for analyzing a country’s trade and capital flows and their economic implications. International trade can facilitate economic growth by increasing the efficiency of resource allocation, providing access to larger capital and product markets, and facilitating specialization based on comparative advantage. The flow of financial capital (funds available for investment) between countries with excess savings and those where financial capital is scarce can increase liquidity, raise output, and lower the cost of capital. From an investment perspective, it is important to understand the complex and dynamic nature of international trade and capital flows because investment opportunities are increasingly exposed to the forces of global competition for markets, capital, and ideas.
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ctors as a country’s stage of economic and financial market development, demographics, quality and quantity of physical and human capital (accumulated education and training of workers), and its area(s) of comparative advantage.1 <span>This reading provides a framework for analyzing a country’s trade and capital flows and their economic implications. International trade can facilitate economic growth by increasing the efficiency of resource allocation, providing access to larger capital and product markets, and facilitating specialization based on comparative advantage. The flow of financial capital (funds available for investment) between countries with excess savings and those where financial capital is scarce can increase liquidity, raise output, and lower the cost of capital. From an investment perspective, it is important to understand the complex and dynamic nature of international trade and capital flows because investment opportunities are increasingly exposed to the forces of global competition for markets, capital, and ideas. <span><body><html>

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Reading 19  International Trade and Capital Flows Introduction
Global investors must address two fundamentally interrelated questions: where to invest and in what asset classes? Some countries may be attractive from an equity perspective because of their strong economic growth and the profitability of particular domestic sectors or industries. Other countries may be attractive from a fixed income perspective because of their interest rate environment and price stability. To identify markets that are expected to provide attractive investment opportunities, investors must analyze cross-country differences in such factors as expected GDP growth rates, monetary and fiscal policies, trade policies, and competitiveness. From a longer term perspective investors also need to consider such factors as a country’s stage of economic and financial market development, demographics, quality and quantity of physical and human capital (accumulated education and training of workers), and its area(s) of comparative advantage.1 This reading provides a framework for analyzing a country’s trade and capital flows and their economic implications. International trade can facilitate economic growth by increasing the efficiency of resource allocation, providing access to larger capital and product markets, and facilitating specialization based on comparative advantage. The flow of financial capital (funds available for investment) between countries with excess savings and those where financial capital is scarce can increase liquidity, raise output, and lower the cost of capital. From an investment perspective, it is important to understand the complex and dynamic nature of international trade and capital flows because investment opportunities are increasingly exposed to the forces of global competition for markets, capital, and ideas. This reading is organized as follows. Section 2 defines basic terminology used in the reading and describes patterns and trends in international trade and capital flows. It also discusses the benefits of international trade, distinguishes between absolute and comparative advantage, and explains two traditional models of comparative advantage. Section 3 describes trade restrictions and their implications and discusses the motivation for, and advantages of, trade agreements. Section 4 describes the balance of payments and Section 5 discusses the function and objectives of international organizations that facilitate trade. A summary of key points and practice problems conclude the reading.





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Merchandising and manufacturing companies generate revenues and profits through the sale of inventory. Further, inventory may represent a significant asset on these companies’ balance sheets. Merchandisers (wholesalers and retailers) purchase inventory, ready for sale, from manufacturers and thus account for only one type of inventory—finished goods inventory. Manufacturers, however, purchase raw materials from suppliers and then add value by transforming the raw materials into finished goods. They typically classify inventory into three different categories: raw materials, work in progress, and finished goods. Work-in-progress inventories have started the conversion process from raw materials but are not yet finished goods ready for sale. Manufacturers may report either the separate carrying amounts of their raw materials, work-in-progress, and finished goods inventories on the balance sheet or simply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements.
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Merchandising and manufacturing companies generate revenues and profits through the sale of inventory. Further, inventory may represent a significant asset on these companies’ balance sheets. Merchandisers (wholesalers and retailers) purchase inventory, ready for sale, from manufacturers and thus account for only one type of inventory—finished goods inventory. Manufacturers, however, purchase raw materials from suppliers and then add value by transforming the raw materials into finished goods. They typically classify inventory into three different categories: raw materials, work in progress, and finished goods. Work-in-progress inventories have started the conversion process from raw materials but are not yet finished goods ready for sale. Manufacturers may report either the separate carrying amounts of their raw materials, work-in-progress, and finished goods inventories on the balance sheet or simply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements. Inventories and cost of sales (cost of goods sold) are significant items in the financial statements of many companies. Comparing the performance of these companies is chal

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Reading 28  Inventories Introduction
Merchandising and manufacturing companies generate revenues and profits through the sale of inventory. Further, inventory may represent a significant asset on these companies’ balance sheets. Merchandisers (wholesalers and retailers) purchase inventory, ready for sale, from manufacturers and thus account for only one type of inventory—finished goods inventory. Manufacturers, however, purchase raw materials from suppliers and then add value by transforming the raw materials into finished goods. They typically classify inventory into three different categories: raw materials, work in progress, and finished goods. Work-in-progress inventories have started the conversion process from raw materials but are not yet finished goods ready for sale. Manufacturers may report either the separate carrying amounts of their raw materials, work-in-progress, and finished goods inventories on the balance sheet or simply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements. Inventories and cost of sales (cost of goods sold)3 are significant items in the financial statements of many companies. Comparing the performance of these companies is challenging because of the allowable choices for valuing inventories: Differences in the choice of inventory valuation method can result in significantly different amounts being assigned to inventory and cost of sales. Financial statement analysis would be much easier if all companies used the same inventory valuation method or if inventory price levels remained constant over time. If there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time. International Financial Reporting Standards (IFRS) permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in, first-out (FIFO), and weighted average cost.4 US generally accepted accounting principles (US GAAP) allow the same three inventory valuation methods, referred to as cost flow assumptions in US GAAP, but also include a fourth method called last-in, first-out (LIFO).5 The choice of inventory valuation method affects the allocation of the cost of goods available for sale to ending inventory and cost of sales. Analysts must understand the various inventory valuation methods and the related impact on financial statements and financial ratios in order to evaluate a company’s performance over time and relative to industry peers. The company’s financial statements and related notes provide important information that the analyst can use in assessing the impact of the choice of inventory valuation method on financial statements and financial ratios. This reading is organized as follows: Section 2 discusses the costs that are included in inventory and the costs that are recognised as expenses in the period in which they





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Inventories and cost of sales (cost of goods sold) are significant items in the financial statements of many companies. Comparing the performance of these companies is challenging because of the allowable choices for valuing inventories: Differences in the choice of inventory valuation method can result in significantly different amounts being assigned to inventory and cost of sales. Financial statement analysis would be much easier if all companies used the same inventory valuation method or if inventory price levels remained constant over time. If there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time.
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ply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements. <span>Inventories and cost of sales (cost of goods sold) are significant items in the financial statements of many companies. Comparing the performance of these companies is challenging because of the allowable choices for valuing inventories: Differences in the choice of inventory valuation method can result in significantly different amounts being assigned to inventory and cost of sales. Financial statement analysis would be much easier if all companies used the same inventory valuation method or if inventory price levels remained constant over time. If there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time. IFRS permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in

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Reading 28  Inventories Introduction
Merchandising and manufacturing companies generate revenues and profits through the sale of inventory. Further, inventory may represent a significant asset on these companies’ balance sheets. Merchandisers (wholesalers and retailers) purchase inventory, ready for sale, from manufacturers and thus account for only one type of inventory—finished goods inventory. Manufacturers, however, purchase raw materials from suppliers and then add value by transforming the raw materials into finished goods. They typically classify inventory into three different categories: raw materials, work in progress, and finished goods. Work-in-progress inventories have started the conversion process from raw materials but are not yet finished goods ready for sale. Manufacturers may report either the separate carrying amounts of their raw materials, work-in-progress, and finished goods inventories on the balance sheet or simply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements. Inventories and cost of sales (cost of goods sold)3 are significant items in the financial statements of many companies. Comparing the performance of these companies is challenging because of the allowable choices for valuing inventories: Differences in the choice of inventory valuation method can result in significantly different amounts being assigned to inventory and cost of sales. Financial statement analysis would be much easier if all companies used the same inventory valuation method or if inventory price levels remained constant over time. If there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time. International Financial Reporting Standards (IFRS) permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in, first-out (FIFO), and weighted average cost.4 US generally accepted accounting principles (US GAAP) allow the same three inventory valuation methods, referred to as cost flow assumptions in US GAAP, but also include a fourth method called last-in, first-out (LIFO).5 The choice of inventory valuation method affects the allocation of the cost of goods available for sale to ending inventory and cost of sales. Analysts must understand the various inventory valuation methods and the related impact on financial statements and financial ratios in order to evaluate a company’s performance over time and relative to industry peers. The company’s financial statements and related notes provide important information that the analyst can use in assessing the impact of the choice of inventory valuation method on financial statements and financial ratios. This reading is organized as follows: Section 2 discusses the costs that are included in inventory and the costs that are recognised as expenses in the period in which they





#essay-tubes-session #has-images #reading-tubos-de-ensayo
IFRS permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in, first-out (FIFO), and weighted average cost. US GAAP allow the same three inventory valuation methods, referred to as cost flow assumptions in US GAAP, but also include a fourth method called last-in, first-out (LIFO). The choice of inventory valuation method affects the allocation of the cost of goods available for sale to ending inventory and cost of sales. Analysts must understand the various inventory valuation methods and the related impact on financial statements and financial ratios in order to evaluate a company’s performance over time and relative to industry peers. The company’s financial statements and related notes provide important information that the analyst can use in assessing the impact of the choice of inventory valuation method on financial statements and financial ratios.
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there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time. <span>IFRS permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in, first-out (FIFO), and weighted average cost. US GAAP allow the same three inventory valuation methods, referred to as cost flow assumptions in US GAAP, but also include a fourth method called last-in, first-out (LIFO). The choice of inventory valuation method affects the allocation of the cost of goods available for sale to ending inventory and cost of sales. Analysts must understand the various inventory valuation methods and the related impact on financial statements and financial ratios in order to evaluate a company’s performance over time and relative to industry peers. The company’s financial statements and related notes provide important information that the analyst can use in assessing the impact of the choice of inventory valuation method on financial statements and financial ratios. <span><body><html>

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Reading 28  Inventories Introduction
Merchandising and manufacturing companies generate revenues and profits through the sale of inventory. Further, inventory may represent a significant asset on these companies’ balance sheets. Merchandisers (wholesalers and retailers) purchase inventory, ready for sale, from manufacturers and thus account for only one type of inventory—finished goods inventory. Manufacturers, however, purchase raw materials from suppliers and then add value by transforming the raw materials into finished goods. They typically classify inventory into three different categories: raw materials, work in progress, and finished goods. Work-in-progress inventories have started the conversion process from raw materials but are not yet finished goods ready for sale. Manufacturers may report either the separate carrying amounts of their raw materials, work-in-progress, and finished goods inventories on the balance sheet or simply the total inventory amount. If the latter approach is used, the company must then disclose the carrying amounts of its raw materials, work-in-progress, and finished goods inventories in a footnote to the financial statements. Inventories and cost of sales (cost of goods sold)3 are significant items in the financial statements of many companies. Comparing the performance of these companies is challenging because of the allowable choices for valuing inventories: Differences in the choice of inventory valuation method can result in significantly different amounts being assigned to inventory and cost of sales. Financial statement analysis would be much easier if all companies used the same inventory valuation method or if inventory price levels remained constant over time. If there was no inflation or deflation with respect to inventory costs and thus unit costs were unchanged, the choice of inventory valuation method would be irrelevant. However, inventory price levels typically do change over time. International Financial Reporting Standards (IFRS) permit the assignment of inventory costs (costs of goods available for sale) to inventories and cost of sales by three cost formulas: specific identification, first-in, first-out (FIFO), and weighted average cost.4 US generally accepted accounting principles (US GAAP) allow the same three inventory valuation methods, referred to as cost flow assumptions in US GAAP, but also include a fourth method called last-in, first-out (LIFO).5 The choice of inventory valuation method affects the allocation of the cost of goods available for sale to ending inventory and cost of sales. Analysts must understand the various inventory valuation methods and the related impact on financial statements and financial ratios in order to evaluate a company’s performance over time and relative to industry peers. The company’s financial statements and related notes provide important information that the analyst can use in assessing the impact of the choice of inventory valuation method on financial statements and financial ratios. This reading is organized as follows: Section 2 discusses the costs that are included in inventory and the costs that are recognised as expenses in the period in which they





#has-images #portfolio-session #reading-portafolios
In this reading we explain why the portfolio approach is important to all types of investors in achieving their financial goals. We compare the financial needs of different types of individual and institutional investors. After we outline the steps in the portfolio management process, we compare and contrast the types of investment management products that are available to investors and how they apply to the portfolio approach.
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Reading 39  Portfolio Management: An Overview Intro
In this reading we explain why the portfolio approach is important to all types of investors in achieving their financial goals. We compare the financial needs of different types of individual and institutional investors. After we outline the steps in the portfolio management process, we compare and contrast the types of investment management products that are available to investors and how they apply to the portfolio approach. One of the biggest challenges faced by individuals and institutions is to decide how to invest for future needs. For individuals, the goal might be to fund retirement needs.





#has-images #portfolio-session #reading-portafolios
One of the biggest challenges faced by individuals and institutions is to decide how to invest for future needs. For individuals, the goal might be to fund retirement needs. For such institutions as insurance companies, the goal is to fund future liabilities in the form of insurance claims, whereas endowments seek to provide income to meet the ongoing needs of such institutions as universities. Regardless of the ultimate goal, all face the same set of challenges that extend beyond just the choice of what asset classes to invest in. They ultimately center on formulating basic principles that determine how to think about investing. One important question is: Should we invest in individual securities, evaluating each in isolation, or should we take a portfolio approach? By “portfolio approach,” we mean evaluating individual securities in relation to their contribution to the investment characteristics of the whole portfolio. In the following section, we illustrate a number of reasons why a diversified portfolio perspective is important.
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Reading 39  Portfolio Management: An Overview Intro
titutional investors. After we outline the steps in the portfolio management process, we compare and contrast the types of investment management products that are available to investors and how they apply to the portfolio approach. <span>One of the biggest challenges faced by individuals and institutions is to decide how to invest for future needs. For individuals, the goal might be to fund retirement needs. For such institutions as insurance companies, the goal is to fund future liabilities in the form of insurance claims, whereas endowments seek to provide income to meet the ongoing needs of such institutions as universities. Regardless of the ultimate goal, all face the same set of challenges that extend beyond just the choice of what asset classes to invest in. They ultimately center on formulating basic principles that determine how to think about investing. One important question is: Should we invest in individual securities, evaluating each in isolation, or should we take a portfolio approach? By “portfolio approach,” we mean evaluating individual securities in relation to their contribution to the investment characteristics of the whole portfolio. In the following section, we illustrate a number of reasons why a diversified portfolio perspective is important. <span><body><html>





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Agricultural societies experience good harvest times and bad ones. Weather is a main factor that influences crop production, but other factors, such as plant and animal diseases, also influence the harvest. Modern diversified economies are less influenced by weather and diseases but, as with crops, there are fluctuations in economic output, with good times and bad times.
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Agricultural societies experience good harvest times and bad ones. Weather is a main factor that influences crop production, but other factors, such as plant and animal diseases, also influence the harvest. Modern diversified economies are less influenced by weather and diseases but, as with crops, there are fluctuations in economic output, with good times and bad times. This reading addresses changes in economic activity and factors that affect it. Some of the factors that influence short-term economic movements—such as changes in populati

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Reading 17  Understanding Business Cycles Introduction
Agricultural societies experience good harvest times and bad ones. Weather is a main factor that influences crop production, but other factors, such as plant and animal diseases, also influence the harvest. Modern diversified economies are less influenced by weather and diseases but, as with crops, there are fluctuations in economic output, with good times and bad times. This reading addresses changes in economic activity and factors that affect it. Some of the factors that influence short-term economic movements—such as changes in population, technology, and capital—are the same as those that affect long-term sustainable economic growth. Other factors, such as money supply and inflation, are more specific to short-term economic fluctuations. This reading is organized as follows. Section 2 describes the business cycle and its phases. The typical behaviors of businesses and households in different phases and tran





#has-images #microscopio-session #reading-wheat
This reading addresses changes in economic activity and factors that affect it. Some of the factors that influence short-term economic movements—such as changes in population, technology, and capital—are the same as those that affect long-term sustainable economic growth. Other factors, such as money supply and inflation, are more specific to short-term economic fluctuations.
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such as plant and animal diseases, also influence the harvest. Modern diversified economies are less influenced by weather and diseases but, as with crops, there are fluctuations in economic output, with good times and bad times. <span>This reading addresses changes in economic activity and factors that affect it. Some of the factors that influence short-term economic movements—such as changes in population, technology, and capital—are the same as those that affect long-term sustainable economic growth. Other factors, such as money supply and inflation, are more specific to short-term economic fluctuations. <span><body><html>

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Reading 17  Understanding Business Cycles Introduction
Agricultural societies experience good harvest times and bad ones. Weather is a main factor that influences crop production, but other factors, such as plant and animal diseases, also influence the harvest. Modern diversified economies are less influenced by weather and diseases but, as with crops, there are fluctuations in economic output, with good times and bad times. This reading addresses changes in economic activity and factors that affect it. Some of the factors that influence short-term economic movements—such as changes in population, technology, and capital—are the same as those that affect long-term sustainable economic growth. Other factors, such as money supply and inflation, are more specific to short-term economic fluctuations. This reading is organized as follows. Section 2 describes the business cycle and its phases. The typical behaviors of businesses and households in different phases and tran





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Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison.
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Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of

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Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor





#has-images #lingote-de-oro-session #reading-jens
This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities.
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n the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. <span>This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. <span><body><html>

Original toplevel document

Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor