Question
Which of the following statements is CORRECT? The financial manager's proper goal should be to attempt to maximize the firm's expected cash flows, since that
Which of the following statements is CORRECT?
The financial manager's proper goal should be to attempt to maximize the firm's expected cash flows, since that will add the most to the individual shareholders' wealth. | ||
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, generally the coming year. | ||
The riskiness inherent in a firm's earnings per share (EPS) depends on the characteristics of the projects the firm selects, and thus on the firm's assets. A good goal for a firm's management is maximization of expected EPS. | ||
Potential agency problems can arise between managers and stockholders, because managers hired as agents to act on behalf of the owners may instead make decisions favorable to themselves rather than the stockholders. |
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