Which of the Following Statements Is CORRECT

question 14

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• 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, generally the coming year.
• C) 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.However, EPS is not affected by the manner in which those assets are financed.
• D) 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.
• E) Large, publicly owned firms like IBM and GE are controlled by their management teams.Ownership is generally widely dispersed; hence managers have great freedom in how they run the firm.Managers may operate in stockholders' best interests, but they also may operate in their own personal best interests.As long as they stay within the law, there is no way to either force or motivate managers to act in the stockholders' best interests.

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Definitions:

Labor Force Participation Rate

The percentage of those in a given category who are employed.

Current U.S. Trends

Recently observed patterns or movements in social, economic, political, or cultural aspects within the United States.

Dual Labor Market

refers to the division of the labor market into two segments: the primary segment offering higher wages, job security, and better working conditions, and the secondary segment characterized by low-paying, insecure, and temporary jobs.

Primary

First in order of importance or sequence, often indicating a main source, factor, or element.