1) In Finance, which of the following is NOT considered the GOAL of the firm? A.
ID: 2721645 • Letter: 1
Question
1) In Finance, which of the following is NOT considered the GOAL of the firm?
A. Maximization of earnings per share
B. Maximization of stock price
C. Maximization of stockholder wealth
D. Maximization of the value of the firm
E. All of the above are correct
F. None of the above is correct
2) TVM. You wish to retire 40 years from today. You currently have $100,000 in your retirement portfolio which earns, on average, 8.4% per year. You wish to accumulate $2,000,000 in your portfolio at the time of retirement. Based on your current portfolio value, would you be needing to make any new contributions between now and retirement in order to attain your retirement goal? Use MONTHLY compounding.
A. No, the future value of current portfolio value is $2,845,416.63.
B. No, the future value of current portfolio value is $1,123,000.46
C. Yes, the future value of current portfolio value is less than $2 million
D. Yes, the future value of current portfolio value is 1,899,555.01
5) RATIO. A firm's return on equity (ROE) is typically defined as
B) Net income divided by the book value of common equity
C) Net income divided by total assets
D) Net income divided by sales
E) Common equity divided by total assets
F) None of the above
Explanation / Answer
Question 1:
Option A
The ultimate objective of financial management is to maximize the wealth of the shareholders and value of the firm. If the wealth of shareholders is maximized, stock prices is automatically maximized. Maximization of earnings per share is the objective of Accounting which deals with accounting profits. Finance deals with cash flows.
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