1. What are agency problems? What are the costs of agency problems? Why may stock-based compensation alleviate the problems? What concerns have been arisen?
2. What is the difference between book value and market value? Although the textbook suggests us to use market value for decision-making purposes, what are the potential problems of market value?
3. Discuss the difference between balance sheet and income statement. Describe how ratio analysis should be conducted and why the results of such an analysis are important to both managers and investors. Finally, discuss potential problems (caveats) associated with financial statement analysis.
4. What is earnings management? Why do firms engage in earnings management? How to measure earnings management? Is earnings management good or bad for stockholders?