BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the number of people employed in the firm.
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the book value of the firm’s assets less the book value of its liabilities.
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the amount of salary paid to its employees.
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the market price per share of the firm’s common stock.
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Detailed explanation-1: -Shareholder wealth in a firm is represented by the market price per share of the firms common stock. Shareholder wealth is defined as the present value of the expected future returns to the owners (that is, shareholders) of the firm.
Detailed explanation-2: -"Shareholder wealth” in a firm is represented by: the number of people employed in the firm. the book value of the firm’s assets less the book value of its liabilities. the amount of salary paid to its employees.
Detailed explanation-3: -The shareholders’ equity, or net worth, of a company equals the total assets (what the company owns) minus the total liabilities (what the company owes). If your company does well, its profits increase and its net worth increases too.
Detailed explanation-4: -Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give a maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company.
Detailed explanation-5: -In a Shareholder Wealth Maximization model (SWM), a firm should strive to maximize the return to shareholders, as measured by the sum of capital gains and dividends, for a given level of risk. • Alternatively, the firm should minimize the level of risk to shareholders for a given rate of return.