[amp_mcq option1=”Both statements are correct” option2=”Both statements are incorrect” option3=”Statement I is correct, Statement II is incorrect” option4=”Statement I is incorrect, Statement II is correct” correct=”option3″]
The correct answer is: C. Statement I is correct, Statement II is incorrect.
The objective of the finance function is to maximize the wealth of the owners of the business. This can be done by increasing the value of the company’s stock, or by increasing the company’s cash flow. Profit maximization is not the same as wealth maximization, because profit is only one measure of a company’s value. A company can have a high profit margin, but if it is not growing, its stock price may not increase. Conversely, a company can have a low profit margin, but if it is growing rapidly, its stock price may increase.
Here is a brief explanation of each option:
- A. Both statements are correct. This is incorrect, because Statement II is incorrect.
- B. Both statements are incorrect. This is incorrect, because Statement I is correct.
- C. Statement I is correct, Statement II is incorrect. This is the correct answer, as explained above.
- D. Statement I is incorrect, Statement II is correct. This is incorrect, because Statement I is correct.