If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should
A) positively affect profits.
B) increase the market value of the firm's common stock.
C) either increase or have no effect on the value of the firm's common stock.
D) accomplish all of the above.

Question

Quizplus · Accepted Answer

Maximizing shareholder wealth means increasing the value of the firm's common stock. Therefore, managers should make decisions that increase the market value of the firm's common stock, which is option B. While increasing profits may often lead to an increase in stock prices, it is not the ultimate objective of maximizing shareholder wealth. Also, making decisions that have no effect on the stock value would not meet the goal of maximizing shareholder wealth.

If Managers Are Making Decisions to Maximize Shareholder Wealth, Then