What Should Be the Primary Operating Goal of a Publicly

question 43

Multiple Choice

What should be the primary operating goal of a publicly owned firm interested in serving its shareholders?

• A) maximize the stock price per share over the long run, which is the stock's intrinsic value
• B) maximize the firm's expected EPS
• C) maximize the firm's expected total income
• D) maximize the stock price on a specific target date

---

Definitions:

Expected Return

Expected return is the anticipated amount of profit or loss an investment is projected to generate, based on historical or forecasted performance.

Warrants

Warrants are a type of security that gives the holder the right to purchase a company’s stock at a specific price until the expiration date.

Long-term Call Options

Financial derivatives granting the holder the right, but not the obligation, to buy a security at a fixed price within a specific long-term period.

Exercise Price

The price stated in the option contract at which the security can be bought (or sold). Also called the strike price.