Question

If you are hired as the new CEO of a corporation after graduation, which of the...

If you are hired as the new CEO of a corporation after graduation, which of the following would you consider to be your most important criterion for success from the owners perspective?

1. Pursue activities that reduce the overall riskiness of the firm.

2. Pursue activities that result in the largest profits for the year.

3. Pursue activities that maximize your personal wealth.

4. Pursue activities that maximize the current stock price.

5. Pursue activities that lead to the most stable stock price for the year.

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Answer #1

The basic objective to maximize the wealth of the shareholders of the company who are the owners of the company. If you are able to maximize the current stock price then it implies that you have achieved the important criterion as a CEO.

Risk can be reduced by the CEO but will also reduce the returns which will not maximize returns for shareholders.

Maximization of profit is a short term objective, long term objective is sustainability of profits.

You are employed by the company so if you do best for company, it will automatically reward you. so personal wealth is not as important as maximizing shareholder's wealth.

Price has to stable true, but also has to be maximized for the benefit of shareholders

The stock price is maximum when everything is right in the company,

Answer : 4. Pursue activities that maximize the current stock price.

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