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Homework answers / question archive / Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits
Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
Do you agree with this statement? Why?
Yes, the statement is true.
The main role of a manager is to maximize the wealth of a company's shareholders. It means that managers must make decisions that will add more value to the firm. This process should be future-oriented because the wealth should be maximized in each consecutive year, not only in the current year. Therefore, managers should not only focus on the current stock value but also on creating long-term profits, so that the value is added to the business in the future years as well.