Maximization of Shareholder Wealth as a Goal Is Superior to Accounting

question 16

Multiple Choice

Maximization of shareholder wealth as a goal is superior to accounting profit maximization because

• A) it considers the time value of the money.
• B) following the shareholder wealth maximization goal will ensure high stock prices.
• C) accounting profits are not the same as cash flows.
• D) A and C.

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Definitions:

Entrepreneur

An individual who initiates and operates a new business venture, taking on financial risks in the hope of profit.

Government Effectiveness

A measure of the quality of public services, the civil service and its independence from political pressures, the quality of policy formulation, and the credibility of the government's commitment to its policies.

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, including water, minerals, forests, and fish.

Underemployment

The condition in which people in a labor force are employed at less than full-time or regular jobs or at jobs inadequate with respect to their training or economic needs.