The primary operating goal of a publicly owned firm interested in serving its shareholders should be to do which of the following?
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) maximize the firm's expected total income
D) maximize the stock price on a specific target date

Question

Quizplus · Accepted Answer

As a publicly owned firm interested in serving its shareholders, the primary operating goal should be to maximize the stock price per share over the long run. This is because the stock price per share represents the intrinsic value of the stock, and maximizing it will benefit the shareholders, who own a portion of the company. Maximizing the firm's expected EPS or total income may not necessarily lead to an increase in stock price, as they do not take into account the value of the company's future growth potential. Maximizing the stock price on a specific target date also does not account for long-term growth and may incentivize short-term decisions that are not in the best interest of the shareholders.

The Primary Operating Goal of a Publicly Owned Firm Interested