Which One of the Following Is a Criticism of Equating

question 59

Multiple Choice

Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?

• 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:

Condenser

A device used to condense a gas or vapor into a liquid.

Ocular Lens

The lens closest to the eye in a microscope or telescope, through which the viewer looks to magnify the image formed by the objective lens.

Objective Lens

The part of a microscope or telescope that is closest to the object being observed, focusing light and creating an initial image.

Oil-Immersion Lens

A microscope lens designed to be used with a drop of oil between the lens and the slide, improving resolution by reducing light refraction.