Shareholders'' wealth maximization, Finance Basics

Shareholders' wealth maximization - Objectives of Business Entity

Shareholders' wealth maximization refers to maximization of the total present value of each decision made in the firm.  Net current value is identical to the difference among the present value of benefits received from a decision and the present value of the price of the decision. 

A financial action along with a positive net present value will maximize the wealth of the shareholders, at the same time as a decision along with a negative net present value will deduct the wealth of the shareholders. Below this goal, a firm will just take those decisions such result in a positive net present value.

Shareholder wealth maximization assists to solve the problems with profit maximization.  This is since, the goal as:

  • Considers time value of money via discounting the expected future cash flows to the present.
  • It recognizes risk via using a discount rate that is a measure of risk to discount the cash flows to the present.
Posted Date: 1/29/2013 1:16:26 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
Before purchasing insurance we have to go through different factors. Among different important factors there are two most crucial aspects we should consider before buying insurance

The Genesis operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to present a capital plan for the operating exp

Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

Example of Asset Based Valuation Extracted information from the books of Kent Limited.   Current liabilities Bank overdraft    Sh. 300,000

DO YOU HAVE A SAMPLE BALANCE SHEET

Solve the following Linear Programming Problem using Simple method. Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1 - X2 = 2 X1, X2 = 0

Dow Theory - Stock Exchange This theory depends upon profiting of prices of a chart of secondary movement. The principal objective is to discover whilst there is a change in t

Definition of Stock Exchange According to Pyle: "Stock Exchange are market places where securities which have been listed thereon, may be bought and sold for either investme

On the 5 th of March 2009, the Bank of England (BoE) lowered its main interest rate to 0.5%, the lowest on record since the Bank has published rates in 1970, which still remains u

Future Ltd is a leading music entertainment company in the country and the stocks of the company are actively traded in the stock exchange. For the year just ended few days back,