Page 14 - DBP5043

10 PRINCIPLES THAT FORM THE

FOUNDATION OF FINANCIAL

MANAGEMENT

• The agency problem is the
result of the separation
between the decision
8 makers and the owners of

The Agency the firm. As a result

Problems managers may make
decisions that are not in line
with the goal of

maximization of
shareholders wealth.

• since some risk can be
diversified away and some
9 cannot. The process of

All risk are not diversification can be reduce
equal risk, and as a result,
measuring projects or an
assets risk is very difficult

• means doing the right thing.
Ethical dilemmas are

everywhere in finance. Ethical
10 behavior is important in
financial management.
Ethical behavior Unfortunately, precisely how

we define what is and what is
not ethical behavior is
sometimes difficult.