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Basic Question 3 of 5
Which statement is false?
II. The ultimate goal of management is to maximize the book value of the company's equity.
I. Companies in the high-tech industry tends to have higher price-to-book ratios than companies in the agricultural industry.
II. The ultimate goal of management is to maximize the book value of the company's equity.
User Contributed Comments 4
| User | Comment |
|---|---|
| farhan92 | ROE =NI/BV so the maths suggests you would want to make BV as small as possible to maximise ROE...so anything that reduces assets (operation lease, depreciation) will max ROE |
| Inaganti6 | Isn't equity like the epitome of wealth in a publicly listed company ? A big equity sections? |
| guest | Market Value of Equity is Important for Publicly Listed Companies. Book Value of Equity is important but its not the ULTIMATE goal of the management. Businesses main goals are: to maximise profits, minimise costs and increase market share. |
| khalifa92 | increase book value & maximize market value |
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Tamara Schultz
Learning Outcome Statements
explain the role of equity securities in the financing of a company's assets
contrast the market value and book value of equity securities
compare a company's cost of equity, its (accounting) return on equity, and investors' required rates of return
CFA® 2024 Level I Curriculum, Volume 3, Module 4.