Question

Which of the following describe the reason(s) why maximization of intrinsic stock value benefits society? Check all that apply. a. Most investors appreciate the risk companies take to maximize their stocks. b. Successful companies benefit consumers. c. Most people have an important stake in the stock market. d. People like to work for companies that minimize operating costs.

Answer 1

Maximizing intrinsic stock value benefits society by driving company growth, enhancing stakeholder wealth, and improving the efficiency and quality of goods and services. This concept aligns with the economic principle that market price should equal marginal cost for the optimal allocation of resources.

Step-by-step explanation:

Maximization of intrinsic stock value plays a critical role in contributing to societal welfare for several reasons. Successful companies not only benefit their shareholders but also have a positive impact on a variety of stakeholders, including employees, consumers, and even the broader community.

• By maximizing the value of their stocks, companies can ensure they continue to grow and, in the process, create jobs, innovate, and provide high-quality products and services that benefit consumers.

• Furthermore, as a large proportion of society has some investment in the stock market, either directly through stock ownership or indirectly through pension funds and other means, the financial health of companies can positively affect the wealth and retirement security of many individuals.

• Lastly, when companies strive to maximize their intrinsic stock value, they often aim to become more efficient and reduce operating costs, which can lead to lower prices for consumers and improvements in the quality of goods and services.

The relation between a company's profitability and societal benefit is encapsulated in the economic principle that equates societal benefit to market price, and societal cost to marginal cost. A situation where the market price equals the marginal cost represents an optimal allocation of resources, thus maximizing societal welfare.

Answer 2

The correct answer is b) succesful companies benefit consumers

Step-by-step explanation:

The intrinsic stock value of a company can be thought of as its real value instead of its nominal value (or monetary value). In the intrinsic value of a stock is high, it is because the company is a healthy financial situation, and probably has good economic prospects. Companies that are run well benefit customers because they can offer goods and services at lower prices, and at higher quality.