The key variables in the owner wealth maximization process are
A) earnings per share and risk.
B) earnings per share and share price.
C) profits and risk.
D) cash flows and risk.

Question

Quizplus · Accepted Answer

The key variables in the owner wealth maximization process are cash flows and risk. Maximizing cash flows can increase the value of the firm and subsequently increase the wealth of the owner. However, this must be done while considering the level of risk involved, as higher risk may lead to decreased value and lower wealth. Earnings per share and profits are important factors but are not the only ones to consider. Share price is also not a direct measure of wealth maximization as it can be influenced by external market factors.

The Key Variables in the Owner Wealth Maximization Process Are