Corporate finance has three main areas of concern: a. Capital budgeting: What long-term investments should the firm undertake? b. Capital structure: Where will the firm get the long-term financing to pay for its investments? In other words, what mixture of debt and equity should the firm use to fund operations? c. Working capital management: How should the firm manage its everyday financial activities? 2. The goal of financial management in a for-profit business is to make decisions that increase the value of the stock or, more generally, increase the market value of the equity. 3. The corporate form of organization is superior to other forms when it comes to raising money and transferring ownership interests, but it has the significant disadvantage of double taxation. 4. There is the possibility of conflicts between stockholders and management in a large corporation. We called these conflicts agency problems and discussed how they might be controlled and reduced. 5. The advantages of the corporate form are enhanced by the existence of financial markets. Financial markets function as both primary and secondary markets