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How does the goal of maximization of shareholder wealth deal with those problems?
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∙ 14y ago
How does the goal of maximization of shareholder wealth deal with uncertainty and timing?
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∙ 14y ago
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What are some of the problems involved with the use of profit maximization as the goal of the firm How does the goal of maximization of shareholder wealth deal with those problems?
Problems involved with the use of profit maximization as the goal of the firm due to numbers of reasons. 1 It ignore the timing of return. 2 It ignores the timing of returns. 3 It ignores the risk.
Why is shareholder wwealth maximization be a beter operating goal than profit maximization?
A firm's operating goal should be to maximize shareholder wealth as it is shareholders who are the owners of the firm. Profit maximizing however is more of a personal/management oriented type goal as it only benefits those running the company. This problem is known as the Agency issue, and it is directly related to the asymmetry of information problem that all firms suffer from. Typically, higher ranking persons in a company, usually managers, know a lot more about the firms operations than do subordinates and common stock holders; this information may be exploited so that only profits and managements' personal pay packets are maximized, and shareholders who funded the firms operations by their purchase of ordinary equity benefit none as they experience no gain through increase in share value. In order to overcome this issue, several things can be done. For example, monitoring techniques can be put in place to ensure management is acting in shareholder interest and not their own, or alternatively, management pay packets can be directly linked to the goal of maximizing shareholder wealth. If and when this goal is achieved and shareholders realize gains, management may be paid a cash bonus or an allotment of shares. Put simply, shareholder wealth maximization should be the firms operating goal simply because they are financing the firms operations with their investing in the firm; to act against their interests is unethical, but still not unheard of.
Do non profitable projects contradict the goal of profit maximization of shareholder wealth?
Although it may appear as a bad idea to invest in non-profitable projects (e.g. those with a negative net present value), companies often invest in them nonetheless as a strategic move. Often times, projects that yield a loss may be used to increase value in other operations of the company. For example: Canon may be loosing money developing new low-priced printers and the project yields a negative return. However, without investing in this project, Canon would be unable to pursue the profitable project of the ink cartridges.
Where can one find information regarding hiring wealth managers?
One can find information regarding hiring wealth managers on the Equilar Atlas website. Wealth managers have a suite of products and typically focus on selling those offerings to their clients. Equilar Atlas helps wealth managers better understand their clients by providing them with the most critical information in a timely and effective manner.
How would you deal with problems when working with other people in a team?
Working with multiple people means working with multiple personality types. Problems may seem inevitable in these situations, but it is important to keep an open mind. Express your opinions clearly and with respect to the other team members. If problems do arise, it is important to privately talk to the individual in a professional manner before those problems affect the entire team.
What are some of the problems involved with the use of profit maximization as the goal of the firm How does the goal of maximization of shareholder wealth deal with those problems?
Problems involved with the use of profit maximization as the goal of the firm due to numbers of reasons. 1 It ignore the timing of return. 2 It ignores the timing of returns. 3 It ignores the risk.
Why is shareholder wwealth maximization be a beter operating goal than profit maximization?
A firm's operating goal should be to maximize shareholder wealth as it is shareholders who are the owners of the firm. Profit maximizing however is more of a personal/management oriented type goal as it only benefits those running the company. This problem is known as the Agency issue, and it is directly related to the asymmetry of information problem that all firms suffer from. Typically, higher ranking persons in a company, usually managers, know a lot more about the firms operations than do subordinates and common stock holders; this information may be exploited so that only profits and managements' personal pay packets are maximized, and shareholders who funded the firms operations by their purchase of ordinary equity benefit none as they experience no gain through increase in share value. In order to overcome this issue, several things can be done. For example, monitoring techniques can be put in place to ensure management is acting in shareholder interest and not their own, or alternatively, management pay packets can be directly linked to the goal of maximizing shareholder wealth. If and when this goal is achieved and shareholders realize gains, management may be paid a cash bonus or an allotment of shares. Put simply, shareholder wealth maximization should be the firms operating goal simply because they are financing the firms operations with their investing in the firm; to act against their interests is unethical, but still not unheard of.
What is difference between profit maximization and wealth maximization. which one of them is more appropriate goal of financial management and why?
Profit MaximizationIt means the rupee income of firms. Firms may function in the market economy or government economy. In market economy prices are determined in competitive markets and those are expected to produce goods and services desired by the society.In accounting sense it tends to become a long-term objective, which measure not only the success of the products but also development of the market for it. The word profit implies a comparison of the operation of the business between two specific dates, which are usually separated by an interval of one year. In order to optimize those corporate sources of wealth on which national prosperity depends, the basic financial objectives of the companies is to maximize within socially acceptable limits, profit from the funds use of funds employed to them.Wealth MaximizationWealth Maximization is also known as Value Maximization or Net Present Worth Maximization. The company, which has profit Maximization as its objective, may adopt the policies fielding exorbitant profit in the short run which are unhealthy for the growth survival and overall interest of the business. Hence it is commonly agreed that the objective of the firm should be to maximize its value or health of the firm.Features of Wealth Maximization:8 It measures the benefit in terms of cash flow and avoids the ambiguity associated with the accounting profits.8 It consider both quality and quantity dimensions of benefits.8 It also incorporates the time value of money.
What factors affects environmental problems and the number of choices a society can make?
Unequal distribution of wealth and we can send food, water, and shelter to those living in poverty.
Is Automatic Wealth a scam?
Yes, it is. There is no such thing as "automatic wealth", and those who sent Ryan $49.99 were disappointed.
To what did china owe its wealth?
They owed their wealth of gold to those who provided them with salt, what mineral they lacked most.
Do non profitable projects contradict the goal of profit maximization of shareholder wealth?
Although it may appear as a bad idea to invest in non-profitable projects (e.g. those with a negative net present value), companies often invest in them nonetheless as a strategic move. Often times, projects that yield a loss may be used to increase value in other operations of the company. For example: Canon may be loosing money developing new low-priced printers and the project yields a negative return. However, without investing in this project, Canon would be unable to pursue the profitable project of the ink cartridges.
How has technology contributed to an unequal distributions of wealth in china?
The same way it does everywhere, those who control that technology demand the greatest share of the wealth, Those who work with their muscles get no say in the matter.
What are social programs transfer wealth from those who have it to those who do not via the government what are they often called?
Relocation programs
Is there a connection between personal wealth and rising marijuana use?
The wealth of the people growing and selling it is certainly higher than those who don't,
Because social programs transfer wealth from those who have it to those who do not via the governmentwhat are they often called?
transfer payments
What was the Spartan attitude toward wealth?
they looked down on the desire of wealth and those who engadged in trade. straight out of the history of our world; the early ages book!(:
