Answer the questions given in the two options below. a) Why is the financial purpose of...

Answer the questions given in the two options below.

a) Why is the financial purpose of the firm determined as "firm value maximization" instead of "making profit"? Discuss.

b) Why is a financial decision taken from the concept of "cash flow" rather than profit? Discuss.

Solutions

Expert Solution

A.financial purpose of a firm is determined as form of value maximization because a firm is always focused at maximization of the value of the company because it is sustainable in the long run and it is beneficial for the interest of the all stakeholders.

Profit making is just focused at maximization of the value of the shareholders and the company employees job protection, but it is not protecting the interest of the society and other stakeholders so value maximization is a wider concept which is need to be adopted by the many companies in order to make an ethical approach to sustainable development which should be beneficial in the long run for the company rather than having a short sighted view of profit maximization

B.financial decision taken from perspective of the cash flows because there are many companies who are generating a lot of cash flows but still they are not able to make a lot of profits, because profit making is never the primary objective of the organisation in the short run as many companies undertake various growth and expansion project in order to maximize their overall value so that those company wood be reporting losses and if we are valuing a company through profit perspective then we would not be able to value those companies so, cash flow perspective to value a company is the best approach in order to maximize the value of companies.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Answer the questions below based on comparing two different loan options using the worksheets you created...

Answer the questions below based on comparing two different loan options using the worksheets you created for the assignment. Option A is 15-year $285,000 fixed rate mortgage loan offered at 5.4% with $2,000 of origination fees. Option B is a 15-year $285,000 fixed-rate mortgage loan offered at 4.92% with $6,500 of origination fees. What is the APR of each Loan Option if the Borrower plans to Prepay after 2 years? Please link your answer

Read the passage given below, and answer the questions given at the end. Each answer must...

Read the passage given below, and answer the questions given at the end. Each answer must be within the word limit of 50-100 words. Passage: Students are responsible for familiarising themselves with the University Code of Student Conduct, as on enrollment with the University the student has placed themselves under the policies and regulations of the University and all of its duly constituted bodies. Disciplinary authority is exercised through the Student Conduct Committee. The Committee has procedures in place for...

Discuss and answer at least two of the questions listed below in detail. 1. Why should...

Discuss and answer at least two of the questions listed below in detail. 1. Why should investment securities be separated into different classifications (Hold to Maturity, Available for Sale, etc.)? Why not just treat them the same so you don’t have to worry about their ability or intention? 2. Is it possible for a company to “manage” its bottom line by classification or reclassification of securities? If so, how? Is this ethical? 3. What are the disclosure requirements regarding Sarbanes-Oxley...

Based on the article pasted below please answer the following questions: 1. The purpose of the...

Based on the article pasted below please answer the following questions: 1. The purpose of the article or problem statement 2. A brief summary of the literature review 3. What are the research questions or hypotheses relevant to "How color affects one's mood"? 4. A basic description of the design/methodology of the research study (if applicable) 5. A report of the findings of the article, and, 6. the value or use of the article in relation to a research project...

Consider the two separate samples given in the data set (samplecomparison.xlsx). Answer the questions below. Data...

Consider the two separate samples given in the data set (samplecomparison.xlsx). Answer the questions below. Data listed below. The range of the first data set is _____ . The variance of the first data set is ____ . (Round to three decimal places as needed) The standard deviation of the first data set is _____ . (Round to three decimal places as needed) The range of the second data set is _____ . The variance of the second data set...

Please use the financial ratio data below to answer the following questions. Assume the two firms...

Please use the financial ratio data below to answer the following questions. Assume the two firms are in the same industry: FIRM A FIRM B Asset Turnover 0.62 Asset Turnover 0.63 Price-earnings Ratio 20 Price-earnings Ratio 15 Current Ratio 1 Current Ratio 0.9 Profit Margin (%) 8.2 Profit Margin (%) 7.9 Financial Leverage 2.5 Financial Leverage 5.5 Times Interest Earned 5 Times Interest Earned 2 Return on Equity (%) 12.7 Return on Equity (%) 27.4 5a. Which firm would you prefer...

) Given the true statements as below, answer the following questions: (a) If Joe is not...

) Given the true statements as below, answer the following questions: (a) If Joe is not a French major and he is not happy, then he doesn’t like to travel. (b) The statement “If Joe knows Discrete Math or he is a CS major, then he is either happy or a CS major.” is false . (c) If Joe is a Math major, then he does not know Discrete Math. (d) If Joe is not a CS major, then he...

Please answer these questions. Thanks 1. What is the purpose of financial planning? 2. What are...

Please answer these questions. Thanks 1. What is the purpose of financial planning? 2. What are the major decision areas involved in developing a plan? 3. What is the percentage of sales approach? 4. What is the internal growth rate? 6. What is the sustainable growth rate? 7.What are the major determinants of growth?

Read the passage given below and answer the three questions. Write the answer in proper APA...

Read the passage given below and answer the three questions. Write the answer in proper APA format with correct in-text citations. Should vaccines be mandatory, or should getting vaccinated be an individual choice? Why is it important for the Canadian government to promote preventative care? Is there a strong case, as Dr. Noni MacDonald argues, for integrating teaching about vaccines and immunization into the school curriculum? Introduction Canada’s reputation for universal healthcare is impressive. But can we still learn something...

Study the data in the table below and answer questions. The two regions are the two...

Study the data in the table below and answer questions. The two regions are the two provinces of a small country (a) What is the national Income for 1999? (b) What is the real capita income for 1999? (c) Which region indicates the biggest economic growth for the last three years? Motivate your answer Region A Region B 1995 1999 1995 1999 Population (millions) 4 5 5 7 Per Capita income R200 R240 R150 R190 Price Index 100 125 100...

Subjects