The Primary Operating Goal of a Publicly-Owned Firm Trying to Best

question 8

Multiple Choice

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

• A) Maximize managers' own interests,which are by definition consistent with maximizing shareholders' wealth.
• B) Maximize the firm's expected EPS,which must also maximize the firm's price per share.
• C) Minimize the firm's risks because most stockholders dislike risk.In turn,this will maximize the firm's stock price.
• D) Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.
• E) Since it is impossible to measure a stock's intrinsic value,the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value.

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Definitions:

Average Cost Formula

A method used in accounting to determine the cost of goods sold and ending inventory by calculating the average cost of all similar items in inventory.

Ending Inventory Valuation

The valuation of goods remaining unsold at the end of an accounting period.

Average Cost Formula

A method used for inventory valuation, determining the cost of goods sold and ending inventory by calculating the weighted average of all purchases and manufacturing costs.

Periodic Inventory System

An accounting system that updates the inventory balance once at the end of the accounting period, using physical counts and purchase records.