Finance Module 3 Learning Checks

Which term reflects a person's beliefs about right and wrong, good and bad, or just and unjust?
Click the card to flip 👆
1 / 17
Terms in this set (17)
Lucas is a financial advisor working for Bullzai, Inc. He is faced with a dilemma. Bullzai has started changing its practices in order to increase profit. As a financial advisor, he is now supposed to suggest to clients to invest in portfolios that will not do as well as the portfolios that Bullzai is invested in. This is an accepted practice done by other businesses in the industry, and it complies with all standards set by the government. However, Lucas knows that this practice is not in his clients' best interest. What type of dilemma is Lucas facing?
How can agency costs be mitigated?Aligning managers' interests with shareholders' interestsWhat is the third step in finding a solution to an ethical dilemma?Consider all stakeholders involvedWhat does the term legal describe?An action that is in accordance with the laws and rules set by an authority.Jack is a personal financial advisor. He is with a new client, and the client is asking him what he recommends for her portfolio. Jack knows that his firm's investment product performed well last year, but its performance changes from year to year—some years it is better than the market, and some years it is not. Also, the fee to invest in the product is higher than the fee to invest in a market index fund. If Jack sells his company's investment product, the customer's loyalty to the company is doubled. Which actions should Jack take?Give a personal recommendation of the company's product while explaining its performance relative to the market over the past several years.Why might a manager manipulate accounting procedures?To make the company's performance look goodWhich situation is an example of an agency problem?Managers follow their own interests instead of the owners' interest.A company is trying to finance a project with a mortgage loan from a bank. The company's assessment of the project indicates that the company may experience several years of loss until the project becomes profitable. This means that the company might lose its ability to pay back the loan and the interest on the mortgage. What action might the bank take to protect its interest?Set a strict covenant that the company cannot easily achieve.