A Company That Focuses Primarily on Stock Prices,profits,and Dividends to Shareholders

question 53

Multiple Choice

A company that focuses primarily on stock prices,profits,and dividends to shareholders is likely to have which of the following outcomes?

• A)It is likely to make large profits and thrive long-term,because the primary function of a corporation is to continue and maximize profits.
• B)It is likely to make large profits and thrive long-term,but have high turnover of employees because they will not be comfortable making the unethical decisions necessary to maximize profits.
• C)It is likely to make large profits but then lose them as it settles lawsuits brought against it by shareholders for fraud.
• D)It is likely to make large profits in the short-term,but fail ultimately because the profit motive will force employees into unethical behavior that will bring the company down eventually.
• E)It is likely to fail from the beginning,because a company that focuses on profits at the expense of all else will not be able to gain customers.

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Definitions:

Income Summary Account

An account used during the closing entry process to transfer the balances of temporary income and expense accounts to permanent accounts, such as retained earnings.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts, thereby preparing the accounts for the next period.

Revenue Account Balance

The total amount of income generated from sales before any expenses are subtracted.

Expense Account Balance

The total amount recorded as expenditures by a company within a specific period, awaiting reimbursement or allocation.