Which of the following should be the primary goal pursued by the financial manager of a firm?
A)Maximize net income (profits).
B)Maximize the firm's net worth, or book value.
C)Maximize dividends paid to common stockholders.
D)Minimize variable operating expenses.
E)Maximize the market value of the firm's stock.

Question

Quizplus · Accepted Answer

The primary goal of a financial manager should be to maximize the market value of the firm's stock. This goal considers both the short-term and long-term interests of the shareholders and is consistent with the goal of maximizing shareholder wealth. Maximizing net income may not necessarily lead to maximizing shareholder wealth, as it does not take into account the cost of capital or the risks associated with investments. Maximizing the firm's net worth or book value also does not necessarily guarantee an increase in shareholder wealth, as it does not consider the market value of assets or the value of future cash flows. Maximizing dividends paid to common stockholders may also not be the best goal, as it may limit the firm's ability to reinvest in profitable projects or maintain financial flexibility. Minimizing variable operating expenses is important, but it should not be the primary goal of the financial manager.

Which of the Following Should Be the Primary Goal Pursued