The Primary Operating Goal of a Publicly-Owned Firm Trying to Best

question 8

Multiple Choice

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

• A) Maximize managers' own interests,which are by definition consistent with maximizing shareholders' wealth.
• B) Maximize the firm's expected EPS,which must also maximize the firm's price per share.
• C) Minimize the firm's risks because most stockholders dislike risk.In turn,this will maximize the firm's stock price.
• D) Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.
• E) Since it is impossible to measure a stock's intrinsic value,the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value.

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Definitions:

Exchange Rate

The price at which one currency can be exchanged for another.

Euros

The eurozone's recognized currency, used by 19 out of the 27 member states of the European Union.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies.

British Pounds

British pounds, or the pound sterling, is the official currency of the United Kingdom, represented by the symbol £.