Which statement is true?

Which statement is true?

• A. Not all owners care only about maximizing profits.
• B. All organizations have formal objectives.
• C. Maximizing profits is equivalent to maximizing firm value.
• D. Maximizing self-interest is a common objective of employees.

Answer: (A)

Owners have diverse goals, not all of them are about profits alone. Some owners value stable cash flows, lower risk, growth pace, liquidity, or even social and ethical outcomes. Because of these varying preferences, many owners do not aim solely to maximize profits. Profit maximization in the short term can conflict with long-run value. Firm value reflects expected future cash flows discounted for risk, so decisions that boost current profits might sacrifice durability, growth opportunities, or stability. Owners who think in terms of long-run value may accept temporary profit reductions to build a stronger, more valuable firm. The other statements assume universal objectives that don’t always hold. Not every organization has formal objectives, especially smaller or family-run or nonprofit entities with informal or multiple aims. Maximizing profits does not automatically equal maximizing firm value, since value also depends on risk and future prospects. And employees’ goals vary; while they may seek fair compensation and job security, these are not the organization’s objective of maximizing value or profits.

Owners have diverse goals, not all of them are about profits alone. Some owners value stable cash flows, lower risk, growth pace, liquidity, or even social and ethical outcomes. Because of these varying preferences, many owners do not aim solely to maximize profits.

Profit maximization in the short term can conflict with long-run value. Firm value reflects expected future cash flows discounted for risk, so decisions that boost current profits might sacrifice durability, growth opportunities, or stability. Owners who think in terms of long-run value may accept temporary profit reductions to build a stronger, more valuable firm.

The other statements assume universal objectives that don’t always hold. Not every organization has formal objectives, especially smaller or family-run or nonprofit entities with informal or multiple aims. Maximizing profits does not automatically equal maximizing firm value, since value also depends on risk and future prospects. And employees’ goals vary; while they may seek fair compensation and job security, these are not the organization’s objective of maximizing value or profits.