Which one of the following actions by a ﬁnancial manager is most aligned with the goal of ﬁnancial management?
A) Increasing the size of a ﬁrm by acquiring a non-proﬁtable competitor.
B) Increasing the sales of the ﬁrm by expanding the company's sales force.
C) Issuing additional shares of stock to repay all of the ﬁrm's long-term debt.
D) Improving the eﬃciency of the company such that the value of the stock increases.
E) Increasing the bonuses paid to the top executives as the size of the ﬁrm increases.

Question

Quizplus · Accepted Answer

The goal of financial management is to maximize shareholder wealth, which is represented by the market value of the firm's stock. By improving efficiency, the company can increase its profits and ultimately increase the value of its shares. A, B, and E are focused on increasing the size of the firm, but this may not necessarily result in an increase in shareholder wealth. C may reduce the firm's long-term debt, but it does not necessarily contribute to maximizing shareholder wealth. Therefore, D is the most aligned action with the goal of financial management.

Which One of the Following Actions by a ﬁNancial Manager