Question

The primary goal of a firm's management is to do what?Select one:a. Maximize owner's share of earningsb. Maximize owner's wealthc. Maximize the firm's salesd. Maximize the firm's assets

Answer 1

b. Maximize owner's wealth.

Step-by-step explanation:

The owners wealth is usually measured by the financial behaviour of shares. In that sense we can find two reasons why is so important for the firm's management.

1. The managers recieve a greater compensation when the performance of the share increases their value. The managers have an incentive in order to keep the price of shares high.

2. Is a market oriented reason. For shareholders, consumers, banks and stakeholders, a good performance of the share is a positive signal for future investments, quality of the services and products and stability in the long run.