TRUE or FALSE: Managers always attempt to maximize the long-run value of their firms' stocks, or the stocks' intrinsic values. This is exactly what stockholders desire. Thus, conflicts between stockholders and managers are not possible.
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TRUE or FALSE:
Managers always attempt to maximize the long-run value of their firms' stocks, or the stocks' intrinsic values. This is exactly what stockholders desire. Thus, conflicts between stockholders and managers are not possible.
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- 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?It is an axiom that may be characterized by managers making decisions that conflict with the best interest of the shareholders. a. the risk-return trade-off b. the agency problems c. the curse of competitive markets d. stockholders versus managersEvaluate 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.
- The efficient market hypothesis says that Multiple Choice market prices reflect underlying asset values. individual investors should not participate in the financial markets. investors should expect to earn abnormal profits. financial managers can accurately time stock and bond sales. creative accounting can be used to inflate stock prices.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 profitsExplain 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.
- True or False Please answer both. 1. High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price. 2. When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.The efficient markets hypothesis identifies three forms of market efficiency. (a) 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? (b) If the weak form of the efficient market hypothesis is valid, must the strong form also hold? Conversely, does strong form efficiency imply weak form efficiency? (c) Stock XYZ, which traded for several months at a price of K72, and then declines to K65. if the stock eventually begins to increase in price, K72 is considered a resistance level because investors who bought originally at K72 will be eager to sell their shares as soon as they can break even on their investment. If everyone in the market believes in resistance levels, why do these beliefs not become self-fulfilling prophecies?The small firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.
- 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?Which of the following are negative consequences of compensating managers with stock? Question 14 options: a) Stock compensation can attenuate management shirking and risk aversion b) Stock compensation forces management to bear high levels of firm-specific risk, which cannot be diversified away c) Stock compensation allows a risk-averse manager to be assured of a minimum level of pay d) Stock compensation is less susceptible to market wide effects outside of management controlWhich of the following is FALSE about the semi-strong form of market efficiency? All publicly available information is reflected in stock prices Fundamental analysis can help investors to outperform the market Technical analysis cannot be used to outperform the market Only private information can help investors to outperform the market