A Typical 'Public' Company Has Many Types of Shareholders, from Individuals

question 68

Multiple Choice

A typical 'public' company has many types of shareholders, from individuals holding a few shares, to large institutions that hold very large numbers of shares. How does a financial manager ensure that the priorities and concerns of such disparate shareholders are met?

• A) The financial manager should seek to make investments that do not harm the interests of the shareholders.
• B) The financial manager should consider the interests and concerns of large shareholders a priority, so the needs of those who hold a controlling interest in the company are met.
• C) The decisions taken by the financial manager should be solely influenced by the benefit to the company since, by maximising its fitness, he or she will also maximise the benefits of that company to the shareholders.
• D) In general, all shareholders will agree that they are better off if the financial manager works to maximise the value of their investment.

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Definitions:

Average Total Cost

Is calculated by dividing the total cost of production by the total quantity produced.

Economic Profit

The remaining amount after all explicit and implicit costs are deducted from the entire revenue.

Technological Breakthrough

A significant innovation or discovery that dramatically advances technology or improves processes and products.

Profit-Maximizing Monopolist

A monopolist entity that aims to maximize its profits by setting prices where marginal costs equal marginal revenues, given its unique market power.