0
Ah, I love loaded questions.
Stockholder Wealth Maximization is the root goal of all business.
But a narow focus on that can lead to neglecting many facets of business:
Re-investment in technology and capital projects.
Investing in Training and employee development
Enviromental risk assesment and reduction.
Comunity involvment and stewardship
Basic Empoyee health and benifit (See Wall Mart )
What else can I help you with?
What is the concept of maximization of shareholder wealth Why is wealth maximization better than profit maximization Wealth maximization?
The concept of maximizing share holder wealth is a goal that encompasses everything that is expected out of a management. when would share holder wealth increase? Either by dividends or by increase in value of the shares. When can a company declare dividends or when would a company's share value increase? when its profits increase, its net sales and revenue increase etc. so indirectly by trying to achieve one goal we are attaining some other goals that are very important for a company's existence.
What is the diffbetween wealth maximization and profit maximization?
wealth maximization is a stratigic target of the entity , while the profit maximizations is a tactical one . the profit maximization always concern with the operational plans .... and the wealth maximization always concern with top managements plans .
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.
What are some shortcomings of the goal of profit maximization?
Profit maximization includes some shortcomings like it ignores the risk that corresponds to the project's stream of cash flow. The timing of returns are ignored with this objective and it does not have as much relevance to a monopoly firm.
What are the disadvantages of a free-market system?
A free market economy has its advantages as well as disadvantages. Some disadvantages are that a competitive environment creates an atmosphere of survival of the fittest. Wealth is not distributed equally, and there is no economic stability.
What are the disadvantages of free marketing system?
A free market economy has its advantages as well as disadvantages. Some disadvantages are that a competitive environment creates an atmosphere of survival of the fittest. Wealth is not distributed equally, and there is no economic stability.
What is the difference between shareholder's wealth maximization and shareholder's profit maximization?
Wealth is the accumulation of profit so it might seem that the two are maximized in the same way. But there are differences. Some examples:- Profit may be taxed. So wealth is maximized by maximizing the net of profit minus tax impacts which may occur in the future.- Increased value of an investment would add to wealth but would not show up as profit until the investment is sold.-Wealth may be obtained in ways other than profit. Receiving a gift or buying something for less than its real value may add to wealth but are not profit.-Stock buy-backs by a company produce no profit but increase stockholder wealth by driving up the value per share held.
Under what condition might profit maximization not lead to stock price maximization?
There are various conditions under which profit maximization may not lead to stock price maximization. Some of them include outstanding shares and assets falling below the cost of the debt among others.
Is the goal of zero profit for some finite period ever consistent with the maximization wealth objective?
Yes, the goal of zero profit for a finite period can be consistent with wealth maximization if it serves a strategic purpose, such as gaining market share, investing in long-term growth, or entering a new market. By temporarily sacrificing profits, a company may position itself for greater future returns, thus enhancing overall wealth. However, this approach must be carefully managed to ensure that stakeholders remain aligned with the long-term vision and that the strategy does not lead to sustained losses.
What are some actions stockholders could take to ensure the management interest and those of stockholders coincided?
Sell all of their stocks in corporations in which the interests of management do not coincide with those of the stockholders.
Who are some of nike stockholders?
Diane names
Is the goal of zero profits for some finite period (three to five years for example) ever consistent with the maximization-of-wealth objective?
Yes, the goal of achieving zero profits for a finite period can be consistent with the maximization-of-wealth objective if it is part of a strategic investment plan aimed at long-term growth. For example, a company may choose to reinvest all earnings into expansion, research and development, or market penetration to build a stronger competitive position, ultimately leading to greater wealth creation in the future. However, this approach must be justified by a clear strategy that demonstrates how the lack of profits will lead to increased value over time.
