If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: A) positively affect profits. B) increase the market value of the firm's common stock. C) either increase or have no effect on the value of the firm's common stock. D) accomplish all of the above.

Question

Giovani Lane

Business

11 September, 03:44

If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: A) positively affect profits. B) increase the market value of the firm's common stock. C) either increase or have no effect on the value of the firm's common stock. D) accomplish all of the above.

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Answers (1)

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America Neal · Answer 1

It is to increase the market value of the firm's common stock (B)

Explanation:

Profits : it is subjective in nature and can be manipulated. Hence, it is not good measure of shareholders wealth maximization.

Increase the market value of the firm's common stock : This is difficult to manipulate because it results from long-term view of business performance through investment in a viable projects. When the company produces good result that give investors good return for their capital, this will have a positive market impact on the share price of the company.