Question
Bella Huys is the new CEO of MetLap Limited. She believes that the sole focus on maximising value for shareholders led to a very short-sighted
Bella Huys is the new CEO of MetLap Limited. She believes that the sole focus on maximising value for shareholders led to a very short-sighted approach of focusing on the share price of the company to the detriment of improving the fundamentals of the company by investing in profitable and sustainable projects. The former CEO was ousted because he was found guilty of providing misleading information to the market to shore up the share price of the company. Ayanda believes a focus on profitability will be a more suitable object.
Which of the following statements is CORRECT based on the scenario provided?
1If the focus on profit maximisation is restated in terms of accounting returns (such as return on equity or capital) it will remove all elements of subjectivity in estimating profitability2A focus on profitability can also reslut in short-term decisions3Profits can be measured and verified from the financial statements so there is no room for providing misleading information4A focus on profitablility will automatically shift the company's focus to long-term growth and sustainability5If the focus on profit maximisation is restated in terms of accounting returns (such as return on equity or capital) it will remove all elements of subjectivity in estimating profitabilityStep by Step Solution
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