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:

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