The Primary Operating Goal of a Publicly-Owned Firm Interested in Serving

question 16

Multiple Choice

The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

• A) Maximize the stock price per share over the long run, which is the stock's intrinsic value.
• B) Maximize the firm's expected EPS.
• C) Minimize the chances of losses.
• D) Maximize the firm's expected total income.
• E) Maximize the stock price on a specific target date.

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Definitions:

Simple Money Multiplier

A formula used to determine the maximum amount of money that can be created by a bank's deposits under a fractional reserve banking system.

Required Reserve Ratio

The fraction of deposits that banks are legally mandated to keep as reserves and not lend out.

Excess Reserves

The reserves held by financial institutions in excess of the minimum reserve requirements set by central banks; these are not used for lending and can influence the money supply.

Commercial Banks

Financial institutions that provide services such as accepting deposits, providing business and personal loans, and offering basic investment products.