Question

The goal of financial management is: (select all that apply)

Question 1 options:

	A) To increase sales
	B) To maximize profits
	C) To increase stock price
	D) To maximize the intrinsic value of the firm

select all the true statements about intrinsic value

Question 2 options:

	The intrinsic value is not observable, but investors attempt to estimate it, and use their estimates as a basis for their investing decisions
	intrinsic value is always the same as the stock price
	stock price hovers near the intrinsic value of the stock, but rarely the stock is priced exactly at the intrinsic value
	intrinsic value is the true value of an asset
	The intrinsic value of a firm always exceeds the value of the firm's assets

Answer 1

1. Option B and D

FM priority is to maximize the intrinsic value of the firm for its owners and then profit maximization as it will improve the efficiency. Others are not the objective of FM.

2.   True statements about intrinsic value:

The intrinsic value is not observable, but investors attempt to estimate it, and use their estimates as a basis for their investing decisions

intrinsic value is the true value of an asset

Explanation: For investment decision we use valuation techniques which is basically finding the real value or intrinsic value of the stock or assets.