Question

F FINLOCUL MENAGEMENT METRICNO A H camise share after taxes l manager is considering we mutually exclusive projects for investmen et is expected to earn RM5 million while Project B is expected to an RN Which of the following statements is the MOST correct? The manager should select project A The manager should select project B. The manager should select the project that maximizes long-term profits, just one year of profits The manager should select the project that causes the stock price to increase mast, which could be A or B. B All of the following statements about agency problem are true EXCEPT . The root cause of agency problem is the conflicts of interest Agency problem is an obstacle to maximize shareholder value Managers need to bear the cost of reducing the agency problems Agency problems result from the separation of management and the own of a firm Working capital management is concerned with A B. managing a firm's capital stock. what long-term investments a firm should undertake. how a firm should raise capital to fund its investments. how a firm can best manage its cash flows in its day-to-day operations. D. The decision that is related to raising capital for a firm's long-term invest called A. (B) C. D. the portfolio decision the capital structure decision the capital budgeting decision the money flow processing decision

Answer 1

Q-1 In a corporation manager's primary aim is to maximize shareholders' wealth, the primary aim of the company is to maximize the shareholders' wealth.

Q-2 The manager should select the project which increases the long term wealth not only short term, for short term wealth gain decision stock price may rise temporarily but it will subside over a period of time. If the aim is to become a long term profitable than the share price of the company will rise eventually and hence generating more wealth for the investor. Hence the answer should be C.

Q-3 The answer to Q-3 is C. because the agency problem is created due to conflict of interest between management and the owners of the company, as a result, any kind of conflict will badly impact the shareholder wealth but this does not mean managers will bear the cost of agency problem because value of shares also go down hence owners will face severe problem due to it.

Q-4 Answer to Q-4 is D. because working capital is related to managing the day to day operations it's nothing but a mismatch between current assets and current liability if a company in a short span of time is not able to service its obligations then they need to borrow and hence they require better working capital management.