Question
Which of the following statements is CORRECT? A. The riskiness inherent in a firms earnings per share (EPS) depends on the characteristics of the projects
Which of the following statements is CORRECT?
A. | The riskiness inherent in a firms earnings per share (EPS) depends on the characteristics of the projects the firm selects, which means it depends upon the firms assets, but EPS does not depend on the manner in which those assets are financed. | |
B. | The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon. | |
C. | Large, publicly-owned firms like AT&T and GM, are controlled by their management teams. Ownership is generally widely dispersed, hence managers have great freedom in how they manage the firm. Managers may operate in stockholders best interests, but they may also operate in their own personal best interests. As long as managers stay within the law, there are no effective tools that can be used to motivate them to take actions that are in the stockholders best interests. | |
D. | The proper goal of the financial manager should be to maximize the firms profit. | |
E. | Potential conflicts of interest can exist between stockholders and managers. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started