Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 3CQ
Summary Introduction
To evaluate the statement:
The managers must not concentrate on the
Introduction:
Any profits that arise during a course of time, that is, less than twelve months, are considered short-term profits or gains. Any profits that arise during a course, that is, more than 12 months, are considered long-term profits or gains.
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Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on the short term profits at the expense of long-term profits.
Evaluate the following:Managers should not focus on the current stock value because doing so will lead to an over emphasis on short term profits at the expense o long term profits
Explain how managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
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- State whether the following statements are true or false. 8) Trade-Off between Risk-Return is the main principle to maximize the firm value. 9) Reduce inventory and use the proceeds to pay off a part of current liabilities will lead to increasethe quick ratio. 10) Unethical Behavior of the manager includes using the information that not available to the publicto make money.arrow_forwardExplain in full detail why the following statement is false: "Financial managers should not focus on the present stock value of the company. Instead, they should focus on the profitability of the company. Doing so will result in increasing the value of the stock.arrow_forwardis(are)the reason(s) for profit maximization not a reasonable goal for firms. a. Profit concept ignores timing of the returns b. Profit concept ignores the cash flow available to stock holders c. Profit is risky and can be some times loss d. All the abovearrow_forward
- A financial manager's goal of maximizing current or short-term earnings may not be appropriate because: Multiple Choice it considers the timing of the benefits. share ownership is widely dispersed. increased earnings may be accompanied by acceptably higher levels of risk. earnings are subjective, they can be defined in various ways such as accounting or economic earningsarrow_forwardOne of the following decisions is not taken to increase the stock price: Select one: a. Maximize costs b. Attracting additional funds c. Maximize net income or profit d. Returning profits to owners over timearrow_forwardA financial manager’s goal of maximizing current or short-term earnings may not be appropriate because a. earnings are subjective; they can be defined in various ways such as accounting or economic earnings b. increased earnings may be accompanied by unacceptably higher levels of risk c. All of the choices d. it fails to consider the timing of the benefitsarrow_forward
- Business risk is A) the risk of bad business strategy or management decisions being madeB) the risk that a company will be unable to meet its financial obligationsC) the risk of not being able to close out your position quickly and at a fair priceD) the risk of prices going up or downE) also known as inflation riskarrow_forwardThe objectives of financial management are Select one: O a. None of the options O b. Profit maximization and wealth maximization O c. Wealth maximization O d. Maximize profits and reduce the employees O e. Profit maximizationarrow_forwardPurchasing Power Risk is A) the risk of bad business strategy or management decisions being madeB) the risk that a company will be unable to meet its financial obligationsC) the risk of not being able to close out your position quickly and at a fair priceD) the risk of prices going up or downE) also known as inflation riskarrow_forward
- Which one of the following actions by a financial manager creates an agency problem? Lowering selling prices that will result in increased firm value Agreeing to expand the company at the expense of stockholders' value Borrowing money when doing so creates value for the firm Agreeing to pay management bonuses based on the market value of the firm's stockarrow_forwardExplain, with examples, why accruals reverse and what the long term consequences are for a firm with aggressive accounting, i.e. with a management trying to overstate the firm's profit.arrow_forwardThe use of financial leverage by the firm has a potential impact on which of the following? (1) The risk associated with the firm's operations. (2) The risk experienced by the stockholders (3) The variability of operating income (4) The variability of net income (5) The probability of going bankrupt Group of answer choices: 1, 2, 3 1, 3, 5 3, 4, 5 2, 3, 4 2, 4, 5arrow_forward
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