the
long-run goal of financial management should be to:
a) maximize the firms shareholder wealth
b)...
the
long-run goal of financial management should be to:
a) maximize the firms shareholder wealth
b) maximize the firms outstanding share of stock
c) minimize the firms reliance upon debt
d) maximize the firms sales
Solutions
Expert Solution
a is correct.
The long term objective is to maximize the shareholder wealth.
Maximizing outstanding shares, minimizing debt or maximizing sales
doesn't necessarily lead to shareholder wealth.
The goal of international financial management is to maximize shareholders' wealth, same as that of financial management. Then what are the four factors/topics that make international finance separate or special?
If the goal of a corporation is to maximize shareholder wealth,
the interests of the managers and the shareholders need to be
aligned. The simplest way to align these interests is to structure
compensation packages appropriately to encourage managers to act in
the best interests of shareholders through stock and options
awards.
Give your thoughts around executive compensation and the
transparency of pay versus performance.
1. The measure of shareholder wealth
According to finance theory, firms should attempt to maximize
the _________ (short-term or long-term) the
long-term price of the firm’s common stock. The benefit to this
objective is that it provides the best financial outcome for the
firm’s _______ (owners or creditors) . **side
note: I think this question has a typo with long-term being added
in twice
To expand his portfolio, Jorge recently purchased 400 shares of
common stock in the American Power...
If a company’s board of directors wants management to maximize
shareholder wealth, should the CEO’s compensation be set as a fixed
dollar amount, or should the compensation depend on how well the
firm performs (that is, the company's performance)? If it is to be
based on performance, how should performance be measured? Would it
be easier to measure performance by the growth rate in reported
profits or the growth rate in the stock’s intrinsic value? Which
would be the better...
Which are advantages of focusing on shareholder wealth
maximization as the goal of financial management?
Check all that apply:
It can be measured objectively.
It's an unambiguous goal.
It avoids conflicts with other goals.
It takes into account both short-term and long-term effects and
expectations.
What are examples of a possible result of the conflict
of interest between shareholders and corporate
managers?
Check all that apply:
Managers paying themselves excessive salaries.
Managers faking earnings to temporarily boost the stock
price....
Which are advantages of focusing on shareholder wealth
maximization as the goal of financial management?
Check all that apply:
It can be measured objectively.
It's an unambiguous goal.
It avoids conflicts with other goals.
It takes into account both short-term and long-term effects and
expectations.
What are examples of a possible result of the conflict
of interest between shareholders and corporate
managers?
Check all that apply:
Managers paying themselves excessive salaries.
Managers faking earnings to temporarily boost the stock
price....
We learned that the ultimate goal of financial management is to
maximize shareholders' wealth. Could this goal conflict with other
goals, such as customer and employee safety, the environment and
the general good of society? Should the firms take into
consideration the well-being of the society in their effort to
maximize shareholders' wealth? Try to think of some specific
scenarios to illustrate your answer.
Is it reasonable to set the goal of the firms to be maximizing
shareholder wealth? What are the pros and cons with that goal.
Please discuss. You will receive participation points.
Question 2
(40 Marks)
“Maximizing shareholder wealth is the main goal of financial
management!” was cited by one classmate. Do you agree? Discuss your
viewpoints within 500 words. Use examples to illustrate your
arguments and justify your conclusion.
Question 3
(40 Marks)
Someone said “Investments with high risk usually come with high
return”. Do you agree? Discuss your viewpoints within 500 words.
Use examples to illustrate your arguments and justify your
conclusion.