Which of the Following Is NOT a Reason That a Firm

question 86

Multiple Choice

Which of the following is NOT a reason that a firm that maximizes profits may fail to maximize shareholder wealth.

• A)The timing of profits matters.Shareholders might prefer lower profits that arrive sooner.
• B)Risk matters.Shareholders are risk averse,so they prefer less risky investments that generate lower profits.
• C)Shareholder wealth depends on cash flow which is not the same as profit.
• D)If a firm maximizes profits by engaging in unethical business practices,it's stock price may be adversely affected.

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Definitions:

Financial Strength

An indicator of the stability and health of a company's financial condition, often assessed through metrics such as equity, debt levels, and liquidity ratios.

Financial Disclosures

Information provided by a company that illustrates its financial performance and position, often found in annual reports and required by regulatory bodies.

Proxy Contest

A challenge to the management of a corporation, typically initiated by a shareholder group to win control of the board of directors.

Acceptable Levels

Standards or thresholds deemed suitable for a specific context, such as risk tolerance in investment or quality in manufacturing.