Exam (elaborations)
FIN2601 Assignment 1 COMPLETE ANSWERS) Semester 2 2024
FIN2601 Assignment 1 COMPLETE ANSWERS) Semester 2 2024
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By: thabisilem28 • 3 months ago
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,FIN2601 Assignment 1 COMPLETE ANSWERS)Semester 2 2024 - DUE August 2024 ; 100%
TRUSTED Complete, trusted solutions and
explanations.
Question 1 Complete Mark 1.00 out of 1.00 QUIZ Which of the
following statements are correct if a company focuses on profits
as financial goal? a) Risk is ignored. b) The share price is
ignored. c) The size of the investment required to generate the
profit is ignored. 1. a and b 2. c and a 3. b and c 4. a, b and c
Question 2 Complete Mark 1.00 out of 1.00
Question 1 Analysis
To determine which statements are correct regarding a
company’s focus on profits as a financial goal, we need to
analyze each statement in the context of profit maximization.
1. Risk is ignored.
When a company focuses solely on profits, it may
overlook the associated risks. Profit maximization can
lead to taking on high-risk projects or investments
without adequately assessing potential downsides.
This could result in significant losses if those risks
materialize.
2. The share price is ignored.
A focus purely on profits does not necessarily
consider how those profits translate into shareholder
value, which is often reflected in the company’s share
, price. While higher profits can lead to an increase in
share price, a narrow focus on profit alone might
neglect other factors that influence market
perception and valuation.
3. The size of the investment required to generate the profit
is ignored.
Companies that prioritize profit may disregard the
capital required to achieve those profits. This could
lead to situations where a company generates high
profits but requires excessive investment, making it
less efficient or sustainable in the long run.
Now, let’s evaluate the combinations provided:
a and b: This combination suggests that both risk and
share price are ignored when focusing on profits.
c and a: This indicates that both the size of investment and
risk are overlooked.
b and c: This implies that both share price and investment
size are neglected.
a, b, and c: This option states that all three aspects—risk,
share price, and investment size—are ignored.
Given our analysis:
Focusing solely on profits indeed leads to ignoring risk
(statement a), potentially overlooking how this affects
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