- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 4. Overview of Equity Securities
- Subject 6. Equity Securities and Company Value
CFA Practice Question
Which statement is false?
II. The ultimate goal of management is to maximize the book value of the company's equity.
I. Companies in the high-tech industry tends to have higher price-to-book ratios than companies in the agricultural industry.
II. The ultimate goal of management is to maximize the book value of the company's equity.
Correct Answer: II
I is true. That's why the ratio should not be used to compare companies in different industries.
User Contributed Comments 4
| User | Comment |
|---|---|
| farhan92 | ROE =NI/BV so the maths suggests you would want to make BV as small as possible to maximise ROE...so anything that reduces assets (operation lease, depreciation) will max ROE |
| Inaganti6 | Isn't equity like the epitome of wealth in a publicly listed company ? A big equity sections? |
| guest | Market Value of Equity is Important for Publicly Listed Companies. Book Value of Equity is important but its not the ULTIMATE goal of the management. Businesses main goals are: to maximise profits, minimise costs and increase market share. |
| khalifa92 | increase book value & maximize market value |