mcq – profit maximization

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March 5, 2016 at 6:51 pm #303625
mansoor
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which of the following is correct
a. profit maximization results in shareholder wealth
b. divorce 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 6, 2016 at 8:28 am #303744
John Moffat
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I have already answered this yesterday!
It is expected dividends that determine the market value of shares (which is the measure of shareholders wealth) – not the level of profits (which can be manipulated and are not cash-based). A and C are both referring to profits.
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