Maximisation of shareholder wealth as a goal is superior to accounting profit maximisation because
A)the former avoids an excessively short term focus.
B)the former ensures high stock prices.
C)accounting profits are not the same as cash flows.
D)both A and C.

Question

Quizplus · Accepted Answer

Maximisation of shareholder wealth as a goal is superior to accounting profit maximisation because it avoids an excessively short term focus, which can lead to decisions that increase current accounting profits but harm the company in the long run. Additionally, accounting profits are not the same as cash flows, which are ultimately what determine a company's ability to create value for shareholders. Therefore, maximising shareholder wealth by focusing on long-term value creation, rather than just short-term accounting profits, is the superior goal.

Maximisation of Shareholder Wealth as a Goal Is Superior to Accounting