Answered: Evaluate the following statement:…

Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on the short term profits at the expense of long-term profits.

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter5: Corporate Ethical Governance & Accountabililty

Section: Chapter Questions

Problem 13.2EC

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Evaluate the following:Managers should not focus on the current stock value because doing so will lead to an over emphasis on short term profits at the expense o long term profits
Explain how managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
Discuss on the statement “Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long term profits.
Explain in full detail why the following statement is false: "Financial managers should not focus on the present stock value of the company. Instead, they should focus on the profitability of the company. Doing so will result in increasing the value of the stock.
You observed that high-level managers make superior returns on investments in their company’s stock. Would this be a violation of weak-form market efficiency? Would it be a violation of strong-form market efficiency?
What does it mean to say that managers should maximize shareholders' wealth "subject to ethical constraints"? What ethical considerations might factor into decisions that result in lower cash flow and stock price effects than they might have otherwise been valued?
Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an expected reduction in the corporate tax rate taking place towards the end of an investment. What are the shortcomings of the payback period criterion? Which of these shortcomings are accounted for in the dynamic payback period criterion? Which are not? “If a stock had high returns so far, it will have low returns in the future”. Discuss whether this statement is true or false, based on the knowledge of the different theories and models out there.
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Determine whether stock prices are affected more by long-term or short-term performance. Provide an example of the effect that supports your claim.
Liquidity risk is A) the risk of bad business strategy or management decisions being madeB) the risk that a company will be unable to meet its financial obligationsC) the risk of not being able to close out your position quickly and at a fair priceD) the risk of prices going up or downE) also known as inflation risk
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