Question

Profit maximization does not adequately describe the goal of the firm becauseI. profit maximization does not require the consideration of riskII. profit maximization considers the timing of a project's returnIII. maximization of dividend payout ratio is a better description of the goal of a firmIV. both I and IIV. None of the aboveWhich of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth?I. profit maximizationII. risk minimizationIII. maximization of the total market value of the firm's common stockIV maximization of market price per shareI. I and II onlyII. II and III onlyIII. III and IV onlyIV. I and III onlyV. I and IV only

Answer 1

Profit maximization does not adequately describe the goal of the firm because____.

ANSWER: Only A and B above

a. profit maximization does not require the consideration of risk.

b. profit maximization ignores the timing of a project's return (it's a short-term measure)

c. maximization of dividend payout ratio is a better description of the goal of the firm.

d. all of the above

e. Only a and b above