Question

Which of the following is NOT a reason that a firm that maximizes profits may fail to maximize shareholder wealth inguneices sock pice may be soienal O B. Shareholder wealth depends on cash flow which is not the same as profit. ° C. The timing of profits matters. Shareholders might prefer lower profits that arrive sooner. O D. Risk matters. Shareholders are risk averse, so they prefer less risky investments that generate lower profits

Answer 1

D.Risk matters. Shareholders are risk averse, so they prefer less risky investments that generate lower profits.

option D is to be selected.

explanation:

Investment in low risk investments result in profits along with a little increase in value of shareholder wealth.

Unethical business practices will adversely affect stock price.

Cash flow is not the same as profit, mere cash flows may not increase shareholder wealth.

Shareholders might prefer lower profits that arrive sooner, but such measures will not increase the shareholder wealth.