The goal of wealth maximization for the owners makes sense for the firm because
A)the owners always know what is best for themselves.
B)the lenders really don't have the right to make decisions.
C)the owners will fire all the employees otherwise.
D)if we have satisfied the owners, we have satisfied all other parties as well.

Question

Quizplus · Accepted Answer

Wealth maximization for the owners means increasing the value of the firm, which benefits all stakeholders, including employees, customers, suppliers, and lenders. If the owners are satisfied, it implies that the firm is performing well and creating value for all parties involved. Therefore, focusing on wealth maximization for the owners aligns the interests of all stakeholders and leads to long-term sustainability and profitability of the firm. Option A is incorrect because the owners may not always know what is best for the firm or other stakeholders. Option B is incorrect because lenders have the right to make decisions based on their contractual agreements with the firm. Option C is incorrect because firing employees is not a sound business decision and can lead to legal and reputational consequences for the firm.

The Goal of Wealth Maximization for the Owners Makes Sense