Finance Concepts: Shareholder Wealth Maximization
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Finance Concepts: Shareholder Wealth Maximization

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Questions and Answers

What concept focuses on increasing the market value of a company's shares over time?

  • Shareholder wealth maximization (correct)
  • Profit maximization
  • Revenue growth
  • Operating efficiency

    • Which of the following issues arises due to conflicting interests between shareholders and management?

  • Agency problem (correct)
  • Insider trading
  • Market inefficiencies
  • Financial leverage

    • What term describes the costs incurred to align the interests of management with those of shareholders?

  • Operational costs
  • Liquidity costs
  • Agency costs (correct)
  • Equity financing costs

    • What strategy can firms use to mitigate the effects of the agency problem?

    <p>Implementing performance-based compensation</p> Signup and view all the answers

    In the context of profit maximization, which of the following statements is least aligned with shareholder interests?

    <p>Investing in long-term growth initiatives</p> Signup and view all the answers

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