The Assumption That Maximization of Shareholder Value Equates to Long-Term

question 19

Multiple Choice

The assumption that maximization of shareholder value equates to long-term maximization of profit, is justified partly by "competition" which means that:

• A)Strong competition erodes profit, so it is always best to operate from a position of strength (high profits) in order to survive the battle
• B)Stronger competition emphasizes the need to create more value and more customer loyalty
• C)Competition plays at the same level across rivals and geographies, and therefore requires profit maximization
• D)Stronger competition increases pressures to expand into other markets thus leading to higher profits

Identify the components and classification of stock dividends and stock splits in financial statements.

Calculate the financial effects of declaring and distributing both cash and stock dividends.

Recognize the differences between small and large stock dividends and their respective accounting treatments.

Analyze the impacts of stock dividends on the marketability and market price of the corporation's stock.

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Definitions:

Flat Tax

A tax system with a constant marginal rate, usually applied to individual or corporate income.

Federal Reserve Board

The governing body of the Federal Reserve System, which is responsible for setting monetary policy in the United States.

Tools

Devices or implements, often hand-held, used to carry out a particular function or task.

Taxation Systems

The structured methods by which governments finance their expenditure by imposing charges on citizens and corporate entities.