١.Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?...

١.Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?
Select one:
a. Maximization of the total market value of the firm's common stock
b. Stakeholder wealth maximization
c. Risk minimization
d. Profit maximization

2.Noncash items refer to:
Select one:
a. the ownership of intangible assets such as patents.
b, expenses which do not directly affect cash flows.
c accrued expenses.
d. inventory items purchased using credit.

Solutions

Expert Solution

ANSWER NO-1) a) MAXIMIZATION OF THE TOTAL MARKET VALUE OF THE FIRM'S COMMON STOCK.

EXPLANATION- THE MAIN OBJECTIVE OF THE FIRM IS TO MAXIMIZE THE WEALTH OF ITS SHAREHOLDERS AND THIS DECISION LED THEM TO INCREASE THE VALUE OF THE FIRMS AND ITS STOCK.

b) IT'S INCORRECT BECAUSE STAKEHOLDERS NOT ONLY INCLUDE SHAREHOLDERS BUT ALSO THE HOLDERS LIKE CREDITORS,DEBENTUREHOLDER, PREFERENCE SHAREHOLDER ETC SO IN QUESTION IT'S ONLY MENTION ABOUT THE SHAREHOLDERS OF THE FIRM.

c) IT'S ALSO NOT CORRECT BECAUSE RISK MINIMIZATION IS A PART OF RISK MANAGEMENT AND MAINLY THIS APPROACH IS FOR RISK AVERSION.

d) IT'S ALSO NOT CORRECT AS PROFIT MAXIMIZATION IS TO DETERMINE THE PRICE,INPUT AND OUTPUT LEVEL THAT LEADS TO A HIGHEST PROFIT BUT IN SHORT TERM WHEREAS WEALTH MAXIMIZATION FOCUS IS ON INCREASING THE OVERALL VALUE OF THE FIRM.

ANSWER NO-2) b) EXPENSES WHICH DO NOT DIRECTLY AFFECT CASH FLOWS.

EXPLANATION- NON CASH ITEM REFERS TO AN EXPENSES LIKE CAPITAL DEPRECIATION, INVESTMENT GAINS OR LOSSES WHICH DOESN'T AFFECT CASH FLOW UNDER INCOME STATEMENT.

a) IT'S NOT CORRECT BECAUSE THE PATENTS OR ANY OTHER INTANGIBLE ASSEST IS AN INTELLECTUAL PROPERTY OR IT HAS NOT PHYSICAL NATURE BUT REPRESENTS IN VALUE FOR THE COMPANY.

c) IT'S ALSO NOT CORRECT AS ACCRUED EXPENSE ARE THE LIABILITIES THAT HAVE BUILT UP OVER A PERIOD OF TIME AND IS PAYABLE ON DUE DATE. IT'S APPEAR IN INCOME STATEMENT UNDER HEAD EXPENSES AND CHARGES AGAINST INCOME.

d) IT'S ALSO NOT CORRECT AS INVENTORY ITEM IS PURCHASED IN CREDIT SO IN FUTURE WE HAVE TO PAYIT, AND IT COMES UNDER THE CASH ITEM HEAD.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Is "profit maximization" consistent with "shareholder-wealth maximization"?

Discuss the management objectives of a firm governed by the shareholder wealth maximization. For example, in...

Discuss the management objectives of a firm governed by the shareholder wealth maximization. For example, in the United States, the decision to shift production from a local factory to a foreign one may be based on the change of the NPV value as a result of such move. The owners may have only minor consideration concerning the impact that such change would have on the community and/or local employees. Explain your point of view carefully.

1) Describe shareholder wealth maximization. Why is it considered the main goal of a firm?

1) Describe shareholder wealth maximization. Why is it considered the main goal of a firm?2) ) Classify the following two transactions into each of the five categories for financial markets:a) An investor buys shares of a company's stock listed on the NYSE, from another investor.b) U.S. Government sells new Treasury-bills.

Explain the concept of shareholder wealth maximization. Is there a conflict between the goal of shareholder...

Explain the concept of shareholder wealth maximization. Is there a conflict between the goal of shareholder wealth maximization and the financial manager's need to act in an ethical manner? Why or why not?

Outline and provide examples of how a firm could pursue shareholder wealth maximization in relation to...

Outline and provide examples of how a firm could pursue shareholder wealth maximization in relation to the following 5 points each. 1. Capital Structure. 2. Cost of capital. 3. NPV 4. IRR 5. Risk & Return

Please define and explain the difference between Shareholder Wealth Maximization and Stakeholder Wealth Maximization. Please articulate...

Please define and explain the difference between Shareholder Wealth Maximization and Stakeholder Wealth Maximization. Please articulate your views on what should be management's primary goal(s).

Which are advantages of focusing on shareholder wealth maximization as the goal of financial management? Check...

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....

Four ways to improve shareholder wealth maximization and how?

A major advantage of using the maximization of shareholder wealth as the primary goal of the...

A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers the timing and the risk of the expected benefits to be received the investor's consumption utility the value of closely held partnerships all the above

Briefly share your thoughts about shareholder wealth maximization. Then, explain the advantages and disadvantages of wealth...

Briefly share your thoughts about shareholder wealth maximization. Then, explain the advantages and disadvantages of wealth maximization from the perspective of a company’s Chief Financial Officer. Include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders). Attention: Make sure that you include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders).

Subjects