Asked by Wally Coveny on Apr 28, 2024
Verified
The best way to maximize the intrinsic value of a company and thus shareholders' wealth is to maximize its earnings per share.
Intrinsic Value
The inherent worth of an asset, security, or company that is determined through analytical methods and underlying perceptions of its true value, beyond its current market price.
Earnings Per Share
A company's profit divided by the outstanding shares of its common stock, indicating the company's profitability.
- Gain insights into the principles underlying the maximization of shareholder wealth and the resulting effects on corporate valuation.
Verified Answer
TM
Taylor ManningMay 01, 2024
Final Answer :
False
Explanation :
Maximizing earnings per share may not always result in maximizing intrinsic value or shareholders' wealth. Other factors such as cash flows, growth opportunities, risk management, and corporate governance also play significant roles in determining the overall value of a company. A short-term focus on earnings per share may lead to sacrificing long-term growth and sustainability.
Learning Objectives
- Gain insights into the principles underlying the maximization of shareholder wealth and the resulting effects on corporate valuation.
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