Which of the following statements is true?

Question

Quizplus · Accepted Answer

Statement A is the only statement that correctly reflects the need for management to consider the needs of bondholders in order to maximize shareholder wealth. Statement B is not necessarily true, as maximizing ex-ante shareholder value does not always guarantee ex-post shareholder value maximization. Statement C is incorrect because maximizing earnings per share does not always lead to the maximization of shareholder wealth. The statement in option A is true as it highlights the importance of considering the needs of the firm's bondholders while maximizing shareholder wealth. Option B is not necessarily true as ex-post shareholder value can be affected by external factors that management may have no control over. Option C is also incorrect as maximizing earnings per share may not necessarily lead to long-term maximization of shareholder wealth.

Which of the Following Statements Is True