Which of the Following Statements Is CORRECT

question 20

Multiple Choice

Which of the following statements is CORRECT?

• A) The proper goal of the financial manager should be to attempt to maximize the firm's expected cash flows, because this will add the
• Most to the wealth of the individual shareholders.
• 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 stockholders and managers, 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 AT&T and GM are controlled by their management teams. Ownership is generally widely dispersed, hence managers have great freedom in how they manage the firm.
• Managers may operate in stockholders' best interests, but they may also operate in their own personal best interests. As long as managers stay within the law, there is no way to either force or
• Motivate them to act in the stockholders' best interests.

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Definitions:

Motor Cortex

The region of the cerebral cortex involved in planning, controlling, and executing voluntary movements.

Occipital Lobes

The region of the brain located at the back of the head, primarily responsible for processing visual information.

Temporal Lobes

Regions of the brain located on either side of the brain, involved in processing auditory information and encoding memory.

Seeing

The ability or act of perceiving objects with the eyes, involving the processing of visual information.