Concept explainers
To critically think about: Whether the goal of maximizing the firm’s stock value conflict with other goals, like avoiding illegal or unethical behavior.
Introduction:
The
To critically think about: Whether the environment, employee and customer safety, and the general good of the society fit in this framework or they are ignored. Illustrate with a specific scenario.
Introduction:
The financial managers make decision for the sake of the shareholders, which must be in the legal and ethical environments. If the shareholders want to buy the shares, then it is beneficial and a good decision, which increases the value of the stock. However, poor or unethical decisions will reduce the value of the stocks.
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Check out a sample textbook solution- The chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.arrow_forwardWhich of the following statements is most often the case? A. Socially responsible businesses tend to post higher profits than those not focused on social responsibility. B. Companies that are not socially responsible will have better profits, but have a moral obligation to society. C. Socially responsible investing gives poorer returns than non-socially responsible Investing. D. Investors are more short termed focus and so socially responsible investing should not be a factor in their investment portfolio.arrow_forwardThe best way to determine business values or ethics is to let the free market decide. Group of answer choices True Falsearrow_forward
- Which of the following statements is CORRECT? Select one: a. Conflict of interest between shareholders and managers is not possible. b. By definition, the agency problem can only take place in corporations but not in proprietorships and partnerships. c. Conflict of interest between shareholders and bondholders is not possible. d. Managers always work to maximize the long-run value, and therefore the price, of their company stocks. This is exactly what shareholders desire.arrow_forwardWhy do you think studies show that no single factor has a bigger impact on the ethicality of a firm’s culture than the personal examples set by firm leaders?arrow_forward
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