Question

ruth corp.s board of directors has stated that the firms goal is to maximize shareholder wealth over time. this statement most likely represents the firms . the market has a tendency to value focused firms more highly than diversified ones, particularly when firms have diversified their operations into areas about which management knows little in the pursuit of sales growth. having a clearly defined and reasonable can help a firm avoid expanding into areas that could get the firm into trouble in the long run. ruth corp. has told its operating managers that it wants to attain a 40% market share, a 15% roe, and an 8% earnings growth rate. this would be an example of a . which of the following statements about the financial planning process are true? check all that apply. management must monitor operations after implementing a financial plan to detect deviations from the plan and adjust accordingly. firms should use a performance-based management compensation system that is based on a managers ability to achieve short-run success. once the forecasted financial statements are completed, the firm must determine how much capital it will need to support these plans. continue without saving

Answer 1

Ruth Corp.'s goal to maximize shareholder wealth guides managerial decisions and helps set clear business objectives. Proper financial planning is crucial, including performance monitoring and capital requirements assessment. Outsiders are more willing to invest as firms establish themselves and show potential for profit due to widely available information on their operations.

Step-by-step explanation:

Maximizing Shareholder Wealth and Financial Planning

Ruth Corp.'s board of directors' statement that the firm's goal is to maximize shareholder wealth over time represents the firm's commitment to increasing the value for its shareholders. The pursuit of this goal should help guide the company's decisions, including the avoidance of unnecessary diversification or expansion into unfamiliar areas that might dilute the company's focus and performance. When Ruth Corp. tells its operating managers that it wants to attain a 40% market share, a 15% return on equity (ROE), and an 8% earnings growth rate, it is setting clear business objectives that define success and provide a target to strive for.

In terms of financial planning, it's true that management must monitor operations to detect and adjust for deviations from the financial plan. A performance-based mangement compensation system should ideally encourage long-term success rather than just short-term achievements. Finally, after forecasting financial statements, the firm must determine the necessary capital to support its plans.

As a firm establishes itself and its business strategy becomes recognised as profitable, the need for potential investors to know the individual managers diminishes due to widely available information about company products, revenues, costs, and profits. Therefore, external investors like bondholders and shareholders become more willing to provide financial capital to the firm. Patterns in how businesses raise financial capital can often be explained by the concept of imperfect information, where insiders of a firm typically have more knowledge about its future profitability than outsiders who provide capital.