Q3.

Evaluate the following statement: Managers should not focus on the current stock value because
doing so will lead to an overemphasis on short term profits at the expense of long-term profits.

A3. The current stock price should not be a manager's primary concern because doing so will cause
them to place an undue emphasis on short-term profits at the expense of long-term profits. However, it
has been repeatedly noted that when managers place their primary attention solely on long-term
profitability, they frequently fail to consider the concerns of investors and short-term sustainability.
Managers will likely focus on generating short-term profits if current stock value is the only factor
considered when making decisions. This could lead them to take excessive risks, such as investing in a
risky business that promises a high rate of return at a greater degree of risk. To increase short-term
profitability, it causes management to lose sight of long-term sustainability. The main agenda of creating
value for the organization should not be overshadowed by only focusing on trying to maximize the
profits.

Q5. Would the goal of maximizing the value of the stock differ for financial management in a foreign
country? Why or why not?

A5. Every organization has similar financial goals, no matter where they operate, which means that
maximizing the stock value in another country would not differ from the goal of maximizing the stock
value in their own country. While the goal will remain the same, the most effective course of action may
vary because of different social, political, and economic conditions.

Q10. Why is the goal of financial management to maximize the current value of company’s stock? In
other words, why isn’t the goal to maximize the future value?

A10. Shareholder wealth maximization is the primary goal of financial management. A firm's net worth
determines the wealth of its shareholders. Company values are unknown and uncertain, and they may
differ from projections. Since the market usually pays what the company's stock is worth, financial
management's goal is usually to maximize its current value. In the future, maximization will result from
building strong, stable values today through careful planning, monitoring, decision-making, and
correcting.