Which of the following is true. The firm’s ultimate financial goal is to maximize its revenues because this means more income for the shareholders. The firm’s ultimate financial goal is to maximize its net income because this increases the earnings per share of the shareholder. The firm’s ultimate financial goal is to increase its customer base to increase its market share. The firm’s ultimate financial goal is to maximize its free cash flows because this drives the value o

Which of the following is true. The firm’s ultimate financial goal is to maximize its revenues because this means more income for the shareholders. The firm’s ultimate financial goal is to maximize its net income because this increases the earnings per share of the shareholder. The firm’s ultimate financial goal is to increase its customer base to increase its market share. The firm’s ultimate financial goal is to maximize its free cash flows because this drives the value o

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

please answer all questions
It is said that one of the goals of a company is wealth maximization. Whose wealth does a firm wants to enhance in wealth maximization? (answer: the firm's stockholders) Why is the answer stockholders?
Need help with both
The objective of financial management is to maximise the value of the firm. We can convert this into the objective of maximising shareholder value. Explain why wealth maximisation takes both risk and return into account.
Why do you think that wealth maximization is an appropriate goal of the firm? Does it lead to maximization of the wealth of shareholders? Does an attempt by the management to maximize value ofthe firm benefit the society? Explain.
1. Dividend policy and free cash flow Company management, especially in established corporations, will formulate a policy that is often called a distribution policy or a payout policy. This policy specifies what management intends to do with the company’s profits and any free cash flow (FCF) generated by the firm. The objective is to create a distribution policy that increases the value of the firm and maximizes the wealth of the firm’s shareholders. Which of the following factors affects management’s decisions regarding a firm’s distribution policy? Check all that apply. -The level of debt and interest payments -The level of cash distributions -The form of payment to shareholders -The stability of payments to shareholders Management can make any form of distribution to the firm’s shareholders using the company’s free cash flow (FCF). The underlying objective is to maximize shareholder wealth by increasing the firm’s value. Any use of FCF…
Consider the effect that corporate profit taxes have on investing. Look back at Figure 15.4. Suppose that the r line is the rate of return a firm earns before taxes. If corporate profit taxes are imposed, the firm’s after-tax returns will be lower (and the higher the tax rate, the lower the after-tax returns). If the firm’s decisions about R&D spending are based on comparing after-tax returns with the interest-rate cost of funds, how will increased corporate profit taxes affect R&D spending? Does this effect modify your views on corporate profit taxes? Discuss.
Based on M & M with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of their firm? The bird in hand theory suggests that a company can reduce its cost of equity capital by reducing its dividend payout ratio. Is this so and why? the homemade dividend strategy argues that investors impose their dividend preference on the firm. is this true or false and why
Which of the following actions should a manager take to optimize the firm's value? * Changing the capital structure if and only if the firm's value rises. Changing the capital structure if and only if the firm's value rises to the advantage of inside management Changing the capital structure if and only if the firm's value increases solely to the benefit of debtholders. Changing the capital structure if and only if the firm's value increases, even if it lowers stockholders' value. Changing the capital structure if and only if the firm's value grows and stockholder equity remains stable.
When a firm is deciding how much cash to distribute to stockholders, it should consider two things: (1) The overriding objective is to maximize shareholder value and (2) the firm's cash flows belong to shareholders, so income shouldn't be retained unless management can reinvest those earnings at higher rates of return than shareholders can earn themselves. The (capital budegeting, capital structure, and residual dividend)? model sets the dividend paid equal to net income minus the amount of retained earnings necessary to finance the firm's optimal capital budget. It can be expressed in equation format as: Dividends = Net income - [(Target equity ratio)(Total capital budget)] Because investment opportunities and earnings will vary from year to year, strict adherence to this model would result in fluctuating, unstable dividends. However, investors prefer stable, dependable dividends. Consequently, firms should use this model to help set their long-run target payout ratios, but not as a…
Can a firm have income without also having a positive cash flow? Explain.
Investors invest in a firm because they are motivated by the potential return on their investment. In evaluating a firm's potential for delivering that rate of return, what do they most look for in a firm's projections? The firm's ability to pay dividends The firm's plans to stock up on inventory in order to never run out of stock The firm's plans to extend credit terms to customers in order to gain more sales The firm's ability to generate cash by liquidating its marketable securities portfolio