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
Management of company and Directors They will consequently be interest in as: a) In generating profits efficiency of the company b) The company's capability to generate

Overlaps and Conflicts Overlaps - whenever attaining ONE MEANS achieving the another Conflicts - whenever attaining ONE CANNOT permit the achievement of another.

Which of the following retirement plan alternatives would allow Tom the greatest deductible contribution while providing him with only a small cash flow commitment each year based

Market Segmentation Theory This theory states as the main investors lenders and borrowers are confined to a particular segment of the market and will not change even whether t

Monitoring Costs - Agency Costs This is incurred to prevent undesirable managerial actions. They are meant to ensure that both parties live to the spirit of agency contract. T

Payback Period Method - Traditional Methods This method gauges the viability of a venture via taking the outflows and inflows over time to ascertain how soon a venture can pay

Contracting Cost - Agency Costs These are costs acquired in devising the contract between the shareholders and managers. The contract is drawn to ensure management act in t

Role of Stock Exchange in Economic Development The Roles of Stock Exchange in Economic Development are as follow: 1. Raising Capital for Businesses The Stock Exchange

A manufacturing organisation has three production cost centres, the cutting department, the processing department and the finishing department, and two service cost centres, the st

how much