The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to
A) Maximize the stock price per share over the long run, which is the stock's intrinsic value.
B) Maximize the firm's expected EPS.
C) Minimize the chances of losses.
D) Maximize the firm's expected total income.
E) Maximize the stock price on a specific target date.

Question

Quizplus · Accepted Answer

The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to maximize the stock price per share over the long run, which is the stock's intrinsic value. This goal aligns the interests of the firm's management with those of the stockholders, as it increases the value of their investment. Maximizing EPS or expected total income may not necessarily result in a higher stock price, and minimizing the chances of losses may be too conservative of a goal. Maximizing the stock price on a specific target date may also be too short-sighted and not sustainable over the long run.

The Primary Operating Goal of a Publicly-Owned Firm Interested in Serving