Which Three Statements Correctly Relate, According to the Finance Theory

question 16

Multiple Choice

Which three statements correctly relate, according to the finance theory view, to the maximisation of shareholder wealth?

• A) In an efficient market it is equivalent to maximising the share price.
• B) It can be ensured by maximising profit- based bonuses for senior management.
• C) It is equivalent to maximising the discounted cash flow to shareholders over a long time horizon.
• D) It is equivalent to maximising the purchasing power available from a shareholding in a firm.

---

Definitions:

Economies Of Scale

Cost advantages that enterprises obtain due to their scale of operation, typically associated with efficiencies in production as output increases.

Collusion

An agreement between firms in a market to limit competition and manipulate prices or market conditions.

Game Theory

A theoretical framework for conceiving social situations among competing players and predicting their choices of action through mathematical models.

Oligopolists

Companies or entities that are part of an oligopoly, a market structure characterized by a small number of firms controlling a large market share, often leading to less competitive markets.