Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 1, Problem 1.12P
Summary Introduction
To discuss: The managers of the firm have to maximize the shareholder wealth which is a subject to ethical constraints and regarding the ethical considerations.
Introduction:
A particular problem where an organization has to select between alternatives that must be evaluated as right or unethical is termed as ethical problem.
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Students have asked these similar questions
QUESTION 8
4) It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?
◦Do firms have any responsibilities to society at large?
◦Is stock price maximization good or bad for society?
◦Should firms behave ethically?
Is stock price maximization the same as profit maximization?
Question 3
a) Explain what is meant by earnings management.
b) Why is corporate governance important for evaluating corporate
earnings management?
c) What assumptions about market efficiency are typically adopted in
capital markets research? What do we mean by market efficiency?
Chapter 1 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 1.1 - What is the goal of the firm and, therefore, of...Ch. 1.1 - For what three main reasons is profit maximization...Ch. 1.1 - What is risk? Why must financial managers consider...Ch. 1.1 - Is maximizing shareholder wealth inconsistent with...Ch. 1.2 - What are the main types of decisions that...Ch. 1.2 - Prob. 1.6RQCh. 1.2 - Prob. 1.7RQCh. 1.2 - What are the major differences between accounting...Ch. 1.2 - Prob. 1.9RQCh. 1.3 - Prob. 1.10RQ
Ch. 1.3 - Prob. 1.11RQCh. 1.3 - What does it mean to say that corporations face a...Ch. 1.3 - Prob. 1.13RQCh. 1.3 - Prob. 1.14RQCh. 1.3 - Prob. 1.15RQCh. 1 - Learning Goal 4 ST1-1 Emphasis on Cash Flows...Ch. 1 - Prob. 1.1WUECh. 1 - Prob. 1.2WUECh. 1 - Learning Goal 4 E1-3 The end-of-year parties at...Ch. 1 - You have been made treasurer for a day at AIMCO,...Ch. 1 - Recently, some branches of Donut Shop, Inc., have...Ch. 1 - Ross Company, a manufacturer of pharmaceuticals,...Ch. 1 - Prob. 1.1PCh. 1 - Prob. 1.2PCh. 1 - Cash flows It is typical for Jane to plan,...Ch. 1 - Marginal cost-benefit analysis and the goal of the...Ch. 1 - Identifying agency problems, costs, and...Ch. 1 - Corporate taxes Tantor Supply, Inc., is a small...Ch. 1 - Prob. 1.7PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.9PCh. 1 - Interest versus dividend expense Michaels...Ch. 1 - Hemingway Corporation is considering expanding its...Ch. 1 - Prob. 1.12PCh. 1 - Prob. 1SE
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- What is the overall objective of financial management? Maximize cash flow Increase earnings O Maximize shareholder's wealth O Minimize risk of the firmarrow_forwardWhat goals might be pursued by managers instead of maximization of shareholder wealth?arrow_forwardDiscuss Mark 10:23-25 and its application to capital rationing and maximizing shareholder wealth. Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives of the business. Capital rationing could affect the stakeholders (other than the shareholder) of the business. Should capital constraints modify the principle of maximizing shareholder wealth?arrow_forward
- Explain how you will apply in real life the following AXIOMS of FINANCIALMANAGEMENT AXIOM 1: RISK-RETURN TRADE OFFAXIOM 2: TIME VALUE OF MONEYAXIOM 3: CASH NOT PROFIT IS KINGAXIOM 4: INCREMENTAL CASH FLOWSAXIOM 5: EFFICIENT CAPITAL MARKETSAXIOM 6: THE CURSE OF COMPETITIVE MARKETSAXIOM 7: AGENCY PROBLEMAXIOM 8: TAXES BIAS BUSINESS DECISIONSAXIOM 9: ALL RISK IS NOT EQUALAXIOM 10: ETHICAL BEHAVIOR IS DOING THE RIGHT THING AND ETHICALDILEMMAS ARE EVERYWHERE IS FINANCE.arrow_forwardTutorial Questions Explain to John, your mentor, the primary goal of the organization? Your manager is requesting you to provide an explanation to the question. Would the role of a financial manager be likely to increase or decrease in importance if the rate of inflation increased? What is the difference between stock price maximization and profit maximization? What are the three principal forms of business organization? What are the advantages and disadvantages of each? What mechanisms exist to influence managers to act in shareholders’ best interests? What is an agency relationship? What agency relationships exist within a corporation? What are financial intermediaries, and what economic functions do they perform? How does an efficient capital market help to reduce the prices of goods and services? What is the term structure of interest rates? What is a yield curve? How should users and savers of…arrow_forwardDoes profit maximization always lead to shareholder’s maximization?arrow_forward
- Helparrow_forwardWhich of the following statements are true about the goal of managers? I. Managers should maximize the wealth of the owners II. Managers should maximize the price of the stock Ill. Managers should only take actions that are expected to increase the share price IV. Managers must be able to apply sustainable development growth for the firm to last long. a. I I Ill and IV b. I ll, and Ill only c. I and Il only d. land Ill onlyarrow_forwardT. The stakeholder view of corporate governance requires corporate decision making to put the interests of employees and customers above shareholders' interest. True Falsearrow_forward
- Explain how the concepts of risk and return drive invesments in business worldarrow_forwardHow does the net present value (NPV) decision rule relate to the primary goal of financial management, which is creating wealth for shareholders?arrow_forward1. What are the supposed benefits of targeting owners' wealth? 2. How can managers target owners' wealth when different owners (shareholders) have different amounts of wealth and may follow different investment strategies?arrow_forward
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