shareholder wealth 1.docx - A Describe the Maximisation of...

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A) Describe the ‘ Maximisation of shareholder wealth ‘ concept and evaluate the importance of business ethics in relation to maximising the firms value It is often thought the main goal of a company is profit maximisation, however this is not entirely true. The main goal for a firm is to maximise shareholder wealth. The meaning of this is maximisation of the market value of the existing shareholders ordinary shares (Petty et al, 2017). To inhabit the greatest maximisation of shareholder wealth it is primary that all financial decisions are incorporated, for example Business ethics which will be discussed (Petty et al, 2017). The reason for maximisation of shareholder worth over profit maximisation is due to the fact that profit maximisation does not incorporate many factors. For example profits do not take into account the timing of cash flows and ignore the risk associated with cash flows, as well as profits can be easily manipulated by management changing the accounting method.(Petty et al, 2017). Maximising of shareholder worth does include these factors, and a shareholder,
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