Question

In: Finance

Profit maximization does not adequately describe the goal of the firm because I. profit maximization does...

Profit maximization does not adequately describe the goal of the firm because

I.

profit maximization does not require the consideration of risk  

II.

profit maximization considers the timing of a project's return

III.

maximization of dividend payout ratio is a better description of the goal of a firm

IV.

both I and II

V.

None of the above

  1. Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth?
          

    I. profit maximization
    II. risk minimization
    III. maximization of the total market value of the firm's common stock

    IV maximization of market price per share


          

    I.

    I and II only

    II.

    II and III only

    III.

    III and IV only

    IV.

    I and III only

    V.

    I and IV only

  1. The true owners of the corporation are the

    I.

    holders of debt issues of the firm
           

    II.

    none of the above

    III.

    common stockholders

    IV.

    board of directors

    V.

    preferred stockholders

Ms Tamika, a financial manager of a corporation, is considering numerous different operating strategies for the coming year.  From a financial management standpoint, which of the following would be her optimal strategy?

I.

To undertake the plan that would be of least risk to the firm

II.

To undertake the plan that would maximize the current price of existing stock

III.

To undertake the plan that would result in a profit for the year

IV.

To undertake the plan that would be least expensive for the firm

V.

None of the above

Which of the following categories of owners enjoy limited liability?

I.

general partners in a limited partnership

II.

None of the above.

III.

shareholders (common stock) of a corporation

IV.

sole proprietors

V.

both a and b

Which of the following Mechanisms is used by shareholders to motivate management?

I.

Threat of Firing

II.

Leveraged Buyouts

III.

Managerial Compensation

IV.

Threat of Firing and Managerial Compensation

V.

None of the above

Solutions

Expert Solution

  • Profit maximization does not adequately describe the goal of the firm because - Correct option is IV. both I and II
  • Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth?- Correct option is III. III and IV only.
  • The true owners of the corporation are the - Correct option is III. common stockholders
  • Ms Tamika, a financial manager of a corporation, is considering numerous different operating strategies for the coming year.  From a financial management standpoint, which of the following would be her optimal strategy? - Correct option is II. To undertake the plan that would maximize the current price of existing stock
  • Which of the following categories of owners enjoy limited liability?- Correct option is III. Shareholders (common stocks) of a corporation
  • Which of the following Mechanisms is used by shareholders to motivate management? - correct option is IV. Threat of Firing and Managerial compensation

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