Asked by Petronel Ntimane on Jun 10, 2024
Verified
A decision that increases immediate net profit is always consistent with maximizing shareholder wealth.
Net Profit
The actual profit after operating expenses, interest, taxes, and depreciation have been deducted from total revenues; it is the bottom line of the income statement.
Shareholder Wealth
The total value of an investment in a company, often measured by the price of the company's stock multiplied by the number of shares owned.
- Recognize the significance of shareholder wealth maximization as the primary financial goal.
Verified Answer
GK
Gopi Kanth NerellaJun 17, 2024
Final Answer :
False
Explanation :
Maximizing shareholder wealth takes into account not only immediate net profit, but also long-term profitability and sustainability. A decision that only focuses on immediate net profit may not be the best for the long-term success and growth of the company, and therefore may not maximize shareholder wealth in the long run.
Learning Objectives
- Recognize the significance of shareholder wealth maximization as the primary financial goal.
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