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 is because the stockholders are the owners of the firm, and maximizing the value of the firm benefits them the most. Maximizing the stock price also ensures that the firm can attract more investors and raise more capital to finance its growth and operations. Maximizing EPS, minimizing chances of losses, and maximizing total income are important goals but they should not be the primary operating goal as they do not necessarily lead to maximizing the stock price over the long run. Maximizing the stock price on a specific target date may lead to short-term gain but does not necessarily lead to long-term value creation for the stockholders.

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