Shareholders'' wealth maximization, Financial Management

Shareholders' wealth maximization

Shareholders' wealth maximization refers to maximization of the net present value of every decision made in the firm. Total present value is equivalent to the difference among the current value of advantages received from a decision and the current value of the cost of the decision.

The financial action with a positive total current value will maximize the wealth of the shareholders, whereas a decision with a negative total present value will decrease the wealth of the shareholders. Beneath this aim, a firm will only take those decisions that outcome in a positive net present value.

Shareholder wealth maximization aids to resolve the troubles with profit maximization. This is since, the goal:

  • Considers time value of money by concession the probable future cash flows to the present.
  • It identifies risk by using a discount rate (that is a measure of risk) to concession the cash flows to the present.

 

Posted Date: 12/8/2012 6:48:10 AM | Location : United States







Related Discussions:- Shareholders'' wealth maximization, Assignment Help, Ask Question on Shareholders'' wealth maximization, Get Answer, Expert's Help, Shareholders'' wealth maximization Discussions

Write discussion on Shareholders'' wealth maximization
Your posts are moderated
Related Questions
Determine the Working Capital Decision Investment in current assets is a major activitythat a finance manager is engaged in a daily basis. How much inventory tokeep, how much

Investors use two management strategies to manage their fixed income portfolios. They adopt either active management strategy or passive management strategy. A

Accounting Framework - Convention of Conservation Conservatism refers to the principle and practices that are established through way of tradition, reluctance to change from e

Describe the differences between foreign bonds and Eurobonds.  Also discuss why Eurobonds make up the lions share of the international bond market. Answer:  The two segments of t

why is agency problem important

What are the primary requirements for a successful JIT inventory control system? For a JIT system to be victorious the supplier must be willing and able to deliver materials im

Q. Problems in computations of cost of retaining earning? Problems in computations of cost of retaining earning: it is sometimes argued that retained earning do not involve any

Following are the details relating to three companies which are identical in terms of ''r'' ABC ltd MNC ltd XYZ ltd Cost of capital

Use of Beta to Partition Risk The total risk or variability in earnings can be attributed to two classes of factors: Marketwide factors which create variability in all

What are the characteristics of an efficient market? The term market efficiency denotes to the ease, speed, and cost of trading securities. In an efficient market the securitie