Which of the Following Is a Criticism of a Policy

question 55

Multiple Choice

Which of the following is a criticism of a policy of maximizing the firm's return on equity (ROE) ?

• A) ROE is based on after-tax earnings, not cash flows.
• B) ROE does not consider risk.
• C) ROE ignores the size of the initial investment as well as future cash flows.
• D) All of the above are criticisms of ROE as a goal.

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Definitions:

Legalize

The process of making certain actions, substances, or behaviors lawful and permissible by official, statutory means.

Pendleton Civil Service Act

U.S. legislation enacted in 1883 that established the Civil Service Commission and marked the beginning of a merit-based system for federal employment instead of jobs being awarded based on political affiliation.

Bribery

The act of giving, offering, receiving, or soliciting something of value to influence the actions of an official or other person in charge of a public or legal duty.

Harrison's Victory

A reference to the Battle of Tippecanoe in 1811, where General William Henry Harrison defeated the Native American forces.