Which Statement Best Describes Balancing Stockholder and Other Stakeholder Interests

question 25

Multiple Choice

Which statement best describes balancing stockholder and other stakeholder interests?

• A)Managers have a responsibility to make a profit for stockholders while operating in a legal and ethical manner to maximize the benefits to entities other than stakeholders.
• B)Managers have a responsibility to make a profit for stockholders while operating in a legal and ethical manner and not take advantage of other stakeholders.
• C)Managers should use some of the business profits to help society.
• D)Managers' only responsibility is to stockholders.
• E)None of these statements are correct.

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Definitions:

Cost of Capital

The rate of return a firm needs to generate on its investment initiatives to preserve its market value and appeal to investors.

Cash Flows

The combined total of cash inflows and outflows in a company, significantly impacting its liquid assets.

NPV

Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Cost of Capital

The minimum profit percentage a corporation is required to generate from its investment initiatives to keep its market price stable and draw in financing.