To maximize the enterprise value, managers should be concerned primarily with ma

Question

To maximize the enterprise value, managers should be concerned primarily with maximizing

____

Earnings per share

Book value per share

Market value per share

All of the above

What is the main advantage of incorporation over unincorporated forms of organization?

____

Limited liability

Elimination of double taxation

Unregulated business environment

Fewer layers in the organizational structure

Which of the following tends to reduce the agency problem?

____

Managers face the threat of being fired

Managerial salaries are fixed at the industrial average

Managers have many other goals in addition to share price maximization

None of the above

Explanation / Answer

1) To maximise the enterprise value, the manager should look at maximising the market value per share of the firm.

2) The main advantage of incorporation over unincorporated forms of organisation is the Limited liability. The unincorporated form of organisation has unlimited liability whereas the incorporated liability is limited.

3) None of the above tends to reduce the agency problem

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