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As a publicly held company, the CEO of a Mike's Bikes firm is charged with creating wealth for its shareholders.  Which of the following is not considered an activity that would enhance shareholder value (SHV)? Minimize shareholder investment Maximize net profit Issue the maximum number of stock shares Minimize risk

Question

As a publicly held company, the CEO of a Mike's Bikes firm is charged with creating wealth for its shareholders.  Which of the following is not considered an activity that would enhance shareholder value (SHV)? Minimize shareholder investment Maximize net profit Issue the maximum number of stock shares Minimize risk

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Solution

The activity that would not enhance shareholder value (SHV) is "Issue the maximum number of stock shares".

Here's why:

  1. Minimize shareholder investment: This would enhance SHV as it reduces the amount of money shareholders need to put into the company, potentially increasing their return on investment.

  2. Maximize net profit: This would also enhance SHV as it increases the amount of money the company makes after all expenses are paid. This could lead to higher dividends for shareholders or more money for the company to reinvest, which could increase the company's value.

  3. Issue the maximum number of stock shares: This would not necessarily enhance SHV. Issuing more shares can dilute the value of existing shares, which could decrease SHV. It could also signal to the market that the company might be desperate for cash, which could negatively impact the company's stock price.

  4. Minimize risk: This would enhance SHV as it makes the company a safer investment, which could increase the company's stock price.

This problem has been solved

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a part of the profit which is distributedto shareholders in a company

Shareholders agree on the financial objective of:Multiple choice question.minimizing riskminimizing the firm's liabilitiesmaximizing the market value of the company's sharesmaximizing the value of this year's profits

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occurs when we maximize the share price for current shareholders

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