Fin 419 Case Study

720 Words3 Pages
Assessing the Goal of Sports Products, Inc. Fin/419 What should the management of Sports Products, Inc. pursue as its overriding goal? It shows that the proper goal to meet is to maximize shareholders wealth, which measured by the market price of the firms stock. When the investors expected cash flow the cash flow is determined by the firms stock price and is generated overtime. As a financial manager it is his or her job to monitor the actions that they expect will help increase the firms future cash flows. An interesting thing to remember is shareholders of a company cannot pay them first before, employees, suppliers, creditors, the government, and stakeholders they will receive nothing. Shareholders take on many risks when running a firm and if the firm is not managed properly to maximize the shareholders wealth, the investors will have no desire to accept the risks for that business to succeed. Does the firm appear to have an agency problem? Reading the case study, yes the firm does appear to have an agency problem. The firms stock has declined $2 per share over the last nine months but the firms profits have been rising. Shareholders normally receive what is called cash dividends and from the text the firm has never paid a dividend in 20 years. From what is written in the first paragraph, shareholders wealth is reducing during this time, and this shows that there is an agency problem. With the management team their actions show that pollution controls will show a profit maximization try, which means the managers are trying to maximize his or her salary, instead of the attempt to maximize shareholders wealth, the stock price. Evaluate the firms approach to pollution control. In reading the text we do not know if the action of dumping pollutants in the adjacent stream was planned or not. Though the firm is being sued by the state and federal
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