ACCA FM · Chapter 1 · Question 9 of 10
Which of the following stakeholder objectives is MOST likely to conflict with an objective of maximising shareholder wealth by investing in higher-risk projects?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Lenders wishing to minimise the risk that interest and capital will not be repaid
Explanation
Lenders receive a fixed return, so they gain nothing from the extra returns on riskier projects but bear more of the downside if the company fails. They therefore prefer the company to take lower risks, which can conflict with shareholders' willingness to accept risk for higher returns. Shareholders and directors holding share options both benefit from share price growth.
More Financial management function MCQs
- Q1For a listed company operating in the private sector, which of the following is generally regarded as the primary financial objective?
- Q2In the context of corporate finance, what is meant by the 'agency problem'?
- Q3Which of the following remuneration schemes is MOST likely to encourage directors to act in a way that increases shareholder wealth over…
- Q4A public sector hospital purchases its medical supplies at the lowest price available for the quality required. Which element of value for…
- Q5A local authority measures the number of households served per $1,000 spent on its waste collection service. Which aspect of value for…