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mcq – profit maximization

This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.

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March 5, 2016 at 3:20 pm #303626
mansoor
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which of the following is correct
a. profit maximization results in shareholder wealth
b. separation of ownership and control can lead to agency costs
c. maximizing EPS results in shareholder wealth maximization
d. increasing market share will lead to increased shareholder wealth
the correct answer is b.
can u pls explain why A and C are not correct?
thank u so much….am sorry to post so many questions but exam next friday!!
March 5, 2016 at 5:40 pm #303653
John Moffat
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Shareholder wealth is measured by the market value of the shares, and this is determined by expected future dividends, and not by profits (which can be manipulated).
The same applies to EPS, given it is the profits per share.
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