Financial managers try to maximize the wealth of their firm's shareholders by ______.
A) increasing revenue
B) decreasing the uncertainty of gain or loss
C) striking a balance between risk and return
D) increasing the uncertainty of gain or loss

Question

Quizplus · Accepted Answer

Financial managers must balance the level of risk undertaken by the company with the expected return on investment. This involves making decisions that will lead to the most wealth accumulation for shareholders, while still considering factors such as cash flow, expansion opportunities, and potential risks. Increasing revenue and increasing uncertainty would not necessarily lead to wealth maximization, while decreasing uncertainty without considering potential gains could lead to missed opportunities for growth.

Financial Managers Try to Maximize the Wealth of Their Firm's