![]() Both the objectives mentioned here are catered by wealth maximization as a key decisive factor for every business. The expectation of every shareholder or investor in a company would be to generate a good amount of return from their investment and safeguard their invested amount.They must cater to the interest of the shareholders. ![]() The ownership percentage depends on the number of shares they hold against the company's total shares. Finance managers serve a principal-agent relationship with the company’s shareholders Shareholders A shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company.However, it is based on a prospective and not a descriptive idea. It is related to cash flows than profits, which are more certain and regular, with the absence of uncertainty associated with profit.Only then can it consider increasing shareholder wealth. To maximize value for shareholders, a company must first be profitable.So, profits are less important than cash flows. Less uncertainty is associated with cash flows than profit maximization, and they are more predictable and consistent.Wealth maximization is a chain aiming to maximize shareholder wealth by increasing the share price, which technically increases market capitalization.
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