"Shareholder wealth" in a firm is represented by: A. the organisation's equity. B. the book value of the firm's assets less the book value of its liabilities. C. the number of people employed in the firm. D. the amount of salary paid to its employees.
Question
"Shareholder wealth" in a firm is represented by: A. the organisation's equity. B. the book value of the firm's assets less the book value of its liabilities. C. the number of people employed in the firm. D. the amount of salary paid to its employees.
Solution
"Shareholder wealth" in a firm is represented by: A. the organisation's equity. This is because shareholders own equity in the company, and their wealth increases as the value of this equity increases. The equity of an organization is determined by the difference between the total value of the assets of the company and its liabilities. Therefore, while option B. the book value of the firm's assets less the book value of its liabilities, is related to the concept of shareholder wealth, it is not the most direct representation. Options C. the number of people employed in the firm and D. the amount of salary paid to its employees, do not directly represent shareholder wealth.
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