Under the residual equity theory
A) A business is viewed as a social institution.
B) Management is responsible for maximizing the wealth of common stockholders.
C) A manager's goals are considered as important as those of the common stockholders.
D) Equities are viewed as restrictions on assets.

Question

Quizplus · Accepted Answer

Under the residual equity theory, management is responsible for maximizing the wealth of common stockholders. This means that after all expenses and obligations are paid, any remaining profits belong to the common stockholders. Therefore, the focus is on shareholder wealth maximization.

Under the Residual Equity Theory