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FIN200 Week 1 CheckPoint Financial Management Goals

FIN200 Week 1 CheckPoint Financial Management Goals -...

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Financial management is the overall management of funds and includes, investment decision, financing decisions and dividend decisions of an organization. There are two main goals of the financial management mainly: a) Profit maximization b) Wealth maximization Profit maximization was generally accepted theoretical criterion for making efficient economic decisions, using profit as an economic concept and defining profit maximization as a criteria for economic efficiency. Focus of financial management is in the value to the owners or suppliers of the equity capital. The wealth of owners is reflected in the market value of shares. So, wealth maximization implies the maximization of the market prices of shares. In other words,
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Unformatted text preview: maximization of the market price of shares is the operational substitute for value/wealth/net present value maximization as a decision. Profit maximization implies that a firm is keener to maximize its profits from business. But this concept is not good from the point of view of long term success of the organization. However, wealth maximization is the ultimate goal of financial management. It is also known as value maximization or net present worth maximization. It considers both quantity and quality dimensions of benefits. At the same time it also incorporates the time value of money....
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