What is the Shareholder wealth definition?

Answer 1

Any business has three levels of value definition - value defined by shareholders, customers and employees/partnership. Shareholder value is the primary value component no business can survive without and provides for the long term agility of an organization. Customers provide medium term liquidity and employees the operational cash flow to ensure the continued operation of an enterprise.

Shareholders create wealth by creating business units and setting expectations of the return that can be gained by each business unit. Shareholders determine where and how they will invest their money. These decisions are made by determining the return on investment that will be delivered a particular business model. The return on development is decided by understanding market sentiment, investment risk and appointing the correct management to the business. Wealth creation includes the decision making processes of whether a business unit grows organically or through acquisition. The scope of a business is determined in terms of what elements of the total value chain will be covered by the business.

It is critical to deploy business processes that facilitate accurate communication between shareholders and the business units they invest in. Even non-profit organization and government organization have shareholders in terms of either their members or the citizens of a country. If the shareholder does not perceive any value from an enterprise the enterprise will start with its slow death. Major pressure has mounted on IT divisions to accurately report the current state of the business to shareholders. However there is still limited information being generated to assist the business to identify and explore value creation opportunities from a shareholder perspective.

Enterprise architects view the world from an enterprise perspective and must ultimately measure their enterprise architecture against the change in wealth creation. Although it is not always possible to directly relate each IT component directly to wealth creation. The Enterprise architect must however view the enterprise's ability to create wealth as an emerging quality that reflects the quality of the architecture that is operating within the enterprise.

Answer 2

Shareholder wealth is defined as the present value of the expected future returns to the owners (that is, shareholders) of the firm. These returns can take the form of periodic dividend payments and/or proceeds from the sale of the stock. Sharered by the market value (that is, the price that the stock trades in the marketplace) of the firm's common stock. Profit maximization typically is defined as a more static concept than shareholder wealth maximization.