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Why maximization of a company share price is preferred as a financial objective to maximization of its sales?
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What are the objective of financial management . Which objective is most important and why?
To achieve the main object of the company at minimum cost.
Explain why judging the efficiency of financial decision requires the existence of a goal?
The goal of the firm is wealth maximization so efficient financial management requires the existence of goal or objective. The goal of the firm is earning market per share but we can know about best company by finding it's market share price. It is a reflection of the firm's investment, financing, and asset management decisions.
What is a wealth maximisation?
Wealth maximization is a financial investment management tool that helps businesses increase profits and net worth. In addition, company shareholders are able to receive a higher return from their investment.
What is the objective of financial controller in a company?
Accurately report the financial results of the company's operations in acordance with generally accepted standards. Produce reports for management which help then analyze and better understand what is going on in the company operations. Help produce company budgets and report spending and revenue against the budgeted numbers.
Theories underlying in objective of a firm?
Thoeries underlying the Objective of a Firm, mainly talk about the subject of Ethics in Business. Debate is going on since a long time, as to whether every Firm's Objective needs to be ETHICAL? the answer may seem as simple as "YES", but the counter arguements that follow are difficult to answer. Does a Cigratte Manufacturing Company have an ethical objective? Are Liquior Producers into Ethical Business? These Companies thrive at the cost of Consumer's Health. Nevertheless they are highly Profit Making. Coming to Profit Maximization, the question goes as to whether Profit Maximization Goal is justitfied? In a private enterprise, no one can have control over Profit maximization. If the profits are made with the use of Society's resources, such profits need to be sowed back for Societal Development. Abnormal Profits/Supernormal Profits indicate the presence of Monopoly, new entrants and market expansion can keep a check on Monopoly, which is a matter of time. Gyan Prakash Singh er_gyanpsingh@yahoo.com 9336691851 MBA(IT)
Which is more comprehensive objective profit maximization or shareholder wealth maximization?
If the company is public listed (trades in the stock market) their aim is shareholder wealth maximization whereas for a privately owned firm a profit maximization objective is appropriate.
Profit maximization is top pririoty objective of CEO?
It depends. If the company is a public company (Ones that have shares traded in organized stock exchanges) then the top priority of the CEO would be shareholder wealth maximization. If it is a private company, the CEO decides on what the owners of the company want and prioritize.
Profit maximization is the basic objective of firm?
A firm's main objective should be to make decisions that maximize the value of the company for its owners, and as the owners of a company are its shareholders, the main financial objective should be 'the maximization of shareholder wealth'. Since shareholders receive their wealth through dividends and capital gains, shareholder wealth will be maximized by maximizing the value of dividends and capital gains that shareholders receive over time. Problems with the 'maximization of profits' objective: Firstly, there are quantitative difficulties associated with profit. Maximization of profits as a financial objective requires the profit to be defined and measured accurately, and that all the factors contributing to it are known and can be taken into account. It is very doubtful that this requirement can be met on a regular basis. E.g- If 5 auditors go into the same company, it is very likely that each will come out with a completely different profit figure. A second problem concerns the timescale over which the profit should be maximized. Should profit be maximized in the short term or the long term?? Given that profit considers one year at a time, the focus is likely to be on short-term profit maximization at the expense of long-term investment, putting the long term survival of the company into doubt. There are many examples of companies going into liquidation shortly after declaring high profits. Check out - Polly Peck Plc's dramatic failure in 1990! (good example) The third problem is that profit does not take account of or make any allowance for risk! It would be inappropriate to concentrate efforts on maximizing accounting profit when this objective does not consider one of the key determinants of shareholder wealth. So the 'maximization of profit' is not a suitable core objective for a company. That is not to say that a company does not need to pay attention to its profit figures, since falling profits of profit warnings are taken by the financial markets as a sign of financial weakness. Instead these sort of profit targets/objectives should can serve a useful purpose in helping a company to achieve short-term or operational objectives within its overall strategic plan.
What are the objective of financial management . Which objective is most important and why?
To achieve the main object of the company at minimum cost.
Does maximization of the company share price depends upon the level of earnings per share that is achieved?
share prices of companies depend on level of earnings of the company,but maximization of share prices depends not only on earnings but also on riskyness of the company's projects, its preferred capital structure ,its corporate responsibility programs,etc
The primary objective of financial accounting is?
increases in equity from a company's earning activities are
What are the primary objectives of financial managers?
The success or failure of a company, is highly dependent on its ability to effectively manage and increase its value ever fiscal year. The implicit financial management goals for managers and directors of a company, is to run in the interest of shareholders and shareholder wealth for long term profitability.
What is the purpose of volume pricing?
When a company uses a volume-pricing objective, it is seeking sales maximization within predetermined profit guidelines. A company using this objective prices a product lower than normal but expects to make up the difference with a higher sales volume.
Explain why judging the efficiency of financial decision requires the existence of a goal?
The goal of the firm is wealth maximization so efficient financial management requires the existence of goal or objective. The goal of the firm is earning market per share but we can know about best company by finding it's market share price. It is a reflection of the firm's investment, financing, and asset management decisions.
The basic objective of financial accounting is?
The basic objective of financial accounting is the formulation of financial statements including the balance sheet, income statement and cash flow statement. Income statements show the company's operating performance quarterly or annually.
What is meant by wealth maximization in a corporate finance environment How are corporate securities contingent claims on the firm's value?
Wealth maximization has been accepted by the finance managers, because it overcomes the limitations of profit maximization. Wealth maximization means maximizing the net wealth of the company's share holders. Wealth maximization is possible only when the company pursues policies that would increase the market value of shares of the company.
Can there be difference between profit maximization and shareholders wealth maximization?
Profit maximization is short term as compare to share holder's wealth maximization, Managers should focus on Share holder's wealth maximization because its what they are hired for. also there are sevseal reasons such as.... 1) the share holders wealth is be considered.. 2)profit maximization doesnt say which type of profit it should maximize-short term or long term 3)profit maximization ignores the social values but only aims at earning maximum profit. 4)wealth maximization also considers improving the goodwill of the organization
