When the price of stock comprehensively reflects the information that is available about the shares, then the market is described as being efficient. In that case, the aggregate decisions that the different stakeholders make in the process concisely ends up showing the exact value that the offering gets at the end of it all (Iverson, 2013) . For that to happen, the value of the initial product must be accurate so that the constantly updated intrinsic value could be a correct reflection in the market too.
There are 2 main forms of efficiencies; the weak and the strong and semi-strong forms. The weak form refers to when the information is not entirely available to everyone involved. For instance, only historical private and public data could be available for the investors (Brigham & Houston, 2012) . On the other hand, the strong and the semi-strong forms represent when the organization makes both private and public information to the involved stakeholders immediately they receive it.
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In market efficiency, financial managers benefit from receiving all market information first and deciding what to do with it (Brigham & Houston, 2012) . There are current and past prices that are supposed to help the financial officer that is sovereign in the organization to make important decisions that are supposed to be beneficial to the company (Iverson, 2013) . For instance, to a CFO, a drop in stock prices after the announcement of an acquisition shows that most investors think it is a bad idea. From there, the employer will know whether to cancel it or do some more communication.
Maximizing on the value of the corporation makes it possible for everybody involved to benefit. When the organization emphasizes on maximizing the value of the firm it means that even the shareholders will be included in the profitability (Iverson, 2013) . On the other hand, when it comes to the maximization of the shareholder’s interests. There is a possibility that other essential stakeholders in the company such as the employees and clients might be disregarded (Yang, 2013) . In the case that the latter happens, even the interests of the shareholders will not be maximized for long.
Leverage benefits the investors because their expected returns rises with the rise in the amount of leverage. Although the risk also rises, it means that the benefit will be more in the case that the outcome of the investment is present (Frömmel, 2017) . They might lose a lot than the unleveraged investors in bad times but they will gain the most in the case things go on well and positively.
6.
In a world with corporate taxes, the weighted average cost of capital tends to decline. The WACC calculates the expense that an organization will incur in their financing. This is especially important when it comes to large organization (Iverson, 2013) . Higher corporate tax means that if the organization happens to get financing through debt the tax will be very little. That means that the WACC falls and when the marginal corporate tax rate increases then it means that the WACC will improve.
7.
Filing for bankruptcy is a process that is costly and has two types of costs; direct and indirect costs. The direct costs those that are involved in the legal process of filling for the bankruptcy (Brigham & Houston, 2012) . These are the legal and administration costs for liquidation and reorganization. These can be increasing in hundreds of dollars which could end up being too expensive. There are other indirect costs which include the difficulty to conduct business to the organization (Yang, 2013) . There are also agency costs which come from selfish strategies amongst the stakeholders.
8.
Agency costs are the costs that are incurred in the organization as a result of selfishness amongst the stakeholders (Frömmel, 2017) . The costs are as a result of conflicts of interest which tempts the investors and stockholders to pursue their own desires before the company eventually goes under. For instance, the CEO might decide to take large and unapproved risks because it is someone else’s money they are playing with. The investors could also be inspired to underinvest because they see it as risking their money unnecessarily (Iverson, 2013) . As such, it would be even tougher for the organization to do what it must so as to conduct business. The bondholders will end up being hurt.
9.
The pecking-order theory is one that is also known as the pecking order theory. This theory help the organization to choose the best capital structure for it. There are a number of implications that come with the pecking order theory (Frömmel, 2017) . The first one is that there is no target amount where the leverage is concerned. Profitable organizations will also not have to use debt for their financing as they forgo dividends. It also depends on low costs for securing finances.
10.
As at December 19 th , the stock indexes had slipped although the retail sector did continue to rise. From Midday 19 th , most of the indexes in the U.S. had sagged. Nasdaq, S&P 500 and Dow Jones all dipped at 0.4%, 0.2% and 0.2% respectively (Whitfield, 2017) . At the moment, market vitality continues being low/. As such, as a long term investor there is no reason for worry. The reason is that financial organizations continue making financial asset purchases which in turn stop random market movements. Indeed, this should indicate a correction in the current market situation where volatility is concerned.
11.
Although the strategy of maximizing shareholder values started in the United States, it went on and became a global phenomenon where the global world is concerned (Whitfield, 2017) . These days, many organization seek automation which cuts the costs that the organization experiences and thus improves their profits at the loss of the employees.
References
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of Financial Management. Cengage Learning.
Frömmel, M. (2017). Finance 2: Asset Allocation and Market Efficiency. Books on Demand.
Iverson, D. (2013). Strategic Risk Management: A Practical Guide to Portfolio Risk Management. John Wiley & Sons.
Whitfield, P. (2017, 12 19). Stock Indexes Slip, But This Key Sector Rises . Retrieved from investors.com: https://www.investors.com/market-trend/stock-market-today/stock-indexes-slip-but-this-key-sector-rises/
Yang, J. (2013, August 26). Maximizing Shareholder Value: The Goal That Changed Corporate America. . Retrieved from Washington Post: August
