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Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization?
Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization
What is the agency problem and how might it impact the goal of maximization of shareholder wealth?
The agency problem is a result of the separation between the decision makers and the owners of the firm. As a result managers may make decisions that are not in line with the goal of maximization of shareholder wealth.
Does agency cost or agency problem interfere with shareholder wealth maximization?
Yes, agency costs and the agency problem can significantly interfere with shareholder wealth maximization. These issues arise when there is a conflict of interest between shareholders (the principals) and company executives or managers (the agents), leading to decisions that may prioritize personal benefits over shareholder value. For instance, managers might pursue projects that enhance their own job security or compensation rather than those that maximize shareholder returns. This misalignment can result in inefficiencies and reduced profitability, ultimately hindering the goal of maximizing shareholder wealth.
Why is shareholder wwealth maximization be a beter operating goal than profit maximization?
A firm's operating goal should be to maximize shareholder wealth as it is shareholders who are the owners of the firm. Profit maximizing however is more of a personal/management oriented type goal as it only benefits those running the company. This problem is known as the Agency issue, and it is directly related to the asymmetry of information problem that all firms suffer from. Typically, higher ranking persons in a company, usually managers, know a lot more about the firms operations than do subordinates and common stock holders; this information may be exploited so that only profits and managements' personal pay packets are maximized, and shareholders who funded the firms operations by their purchase of ordinary equity benefit none as they experience no gain through increase in share value. In order to overcome this issue, several things can be done. For example, monitoring techniques can be put in place to ensure management is acting in shareholder interest and not their own, or alternatively, management pay packets can be directly linked to the goal of maximizing shareholder wealth. If and when this goal is achieved and shareholders realize gains, management may be paid a cash bonus or an allotment of shares. Put simply, shareholder wealth maximization should be the firms operating goal simply because they are financing the firms operations with their investing in the firm; to act against their interests is unethical, but still not unheard of.
What are the practical difficulties in installing a proper costing system in any organisation?
One problem associated with adopting a costing system is the fact that implementation can be a problem. With so many moving pieces, managers must make sure they coordinate every aspect of the project to ensure that implementing the project is done successfully.
Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization?
Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization
What is the agency problem and how might it impact the goal of maximization of shareholder wealth?
The agency problem is a result of the separation between the decision makers and the owners of the firm. As a result managers may make decisions that are not in line with the goal of maximization of shareholder wealth.
Does agency cost or agency problem interfere with shareholder wealth maximization?
Yes, agency costs and the agency problem can significantly interfere with shareholder wealth maximization. These issues arise when there is a conflict of interest between shareholders (the principals) and company executives or managers (the agents), leading to decisions that may prioritize personal benefits over shareholder value. For instance, managers might pursue projects that enhance their own job security or compensation rather than those that maximize shareholder returns. This misalignment can result in inefficiencies and reduced profitability, ultimately hindering the goal of maximizing shareholder wealth.
Is there a difference between corporate profit maximization and maximization of shareholder wealth?
Sure, profit maximization relates to profits *only* while shareholder wealth also involves total company equity, debt ratios and any of 15 other financial performance measure ratios. Management could focus on profit maximization over a longer period of time, say, 40 years (Toyota), while the shareholder would rather see stock values and corporate total value increase immediately (get in and get out) (90% of American manufacturers). If management focused on short-term profit maximization, say at the expense of long term sales revenues, then shareholder wealth (stock price) could actually decrease as a result of the loss of market share. The conflict of interests between shareholders and executives is an example of the "principle-agent problem."
How can the maximization problem be effectively addressed in the context of resource allocation?
The maximization problem in resource allocation can be effectively addressed by carefully analyzing the available resources, setting clear objectives, and using optimization techniques to allocate resources in a way that maximizes the desired outcome. This involves prioritizing needs, considering trade-offs, and continuously monitoring and adjusting resource allocation to achieve the best possible results.
Why is shareholder wwealth maximization be a beter operating goal than profit maximization?
A firm's operating goal should be to maximize shareholder wealth as it is shareholders who are the owners of the firm. Profit maximizing however is more of a personal/management oriented type goal as it only benefits those running the company. This problem is known as the Agency issue, and it is directly related to the asymmetry of information problem that all firms suffer from. Typically, higher ranking persons in a company, usually managers, know a lot more about the firms operations than do subordinates and common stock holders; this information may be exploited so that only profits and managements' personal pay packets are maximized, and shareholders who funded the firms operations by their purchase of ordinary equity benefit none as they experience no gain through increase in share value. In order to overcome this issue, several things can be done. For example, monitoring techniques can be put in place to ensure management is acting in shareholder interest and not their own, or alternatively, management pay packets can be directly linked to the goal of maximizing shareholder wealth. If and when this goal is achieved and shareholders realize gains, management may be paid a cash bonus or an allotment of shares. Put simply, shareholder wealth maximization should be the firms operating goal simply because they are financing the firms operations with their investing in the firm; to act against their interests is unethical, but still not unheard of.
What are the Steps in the army problem-solving model?
Defining a problem, developing possible solutions to solve the problem, arriving at the best solution, and implementing it.
What is the systematic approach to Army problem solving?
official defining a problem, developing possible solutions to solve the problem, arriving to the best solution to solve the problem, and implementing it
What involves presenting a problem to a group of people and allowing them to present ideas for solution to the problem?
_ involves presenting a problem to a group of people and allowing them to present ideas for solution to the problem.
The life skill that helps you to deal with troubles or problems is?
Problem-solving is the life skill that helps individuals effectively navigate troubles or difficulties. It involves identifying issues, brainstorming solutions, evaluating options, and implementing a plan to address the problem in a constructive manner. Developing strong problem-solving skills can enhance resilience and empower individuals to overcome challenges effectively.
What is reader writer problem?
The reader-writer problem is a synchronization issue that arises in concurrent programming. It involves multiple threads accessing a shared resource; readers can access the resource simultaneously without interfering with each other, while writers need exclusive access to the resource to maintain consistency. Implementing a solution involves ensuring that readers and writers coordinate access appropriately to avoid conflicts and maintain data integrity.
If Thomas is diagnosed with nerve deafness chances are good that his problem involves the?
help pls His problem involves the Cochlea! Tha answer is Cochlea
