Wealth maximization, Financial Management

Wealth Maximization :- It is as well termed as value maximization or Net Present worth maximization. This schema is now universally accepted as an appropriate criterion for making financial decision as it removes all the limitations of profit maximization approach. It is as well known as net present value (NPV) maximization approach. As-per to this approach the worth of an asset is measured in terms of benefits received from it's utilize less the cost of its acquisition. Paybacks are measured in terms of cash flows received from its use rather than accounting profit which was the basis of measurement of benefits in profit maximization approach.

Another significant feature of this approach is that it as well incorporates the time value of money. While calculating the value of future cash flows an allowance is made for time and risk factors by discounting or reducing the cash flows by a certain percentage. This proportion is known as discount rate.

Posted Date: 8/3/2013 3:40:27 AM | Location : United States







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

Write discussion on Wealth maximization
Your posts are moderated
Related Questions
Differences between Hedge Funds and Mutual Funds Hedge Funds are extremely flexible in their investment options because they use financial instruments generally beyond the reach

Advantages and disadvantage of pacipatory style of budgeting

Effect on Stock Valuation Until the 1960s, common stocks were viewed as a good instrument against loss caused by inflation. Also, before 1960, stocks were not providing full he

After determining the expected cash flows and appropriate interest rate, the last step in the valuation process is to find the total PV of all cash flows. The PV

Define the term- Profitability maximisation Profitability maximisation would imply that a firm must be guided in financial decision making by one test; select projects, assets

Turnover has increased 10% since 2009 even if this is at the expense of a drop in the gross margin earned which has fallen from 35.0% to 32.7% which has resulted in only a marginal

The objective of the assignment is to develop an understanding of the factors that influence changes in the prices of stocks. *A person has $ 100,000 that they have to invest in s

Explain the factors affecting the choice of a minimum cash balance amount. The smallest cash balance amount is determined by how easy it is to raise funds when needed, how expe

a) Gross profit = $500,000 and Expenses = $100,000 for Year 2. b) Year 2 GPM = $500k / $1,000k = 50.0% Year 1 GPM = $400k / $850k = 47.05% Year 2 NPM = $400k / $1,000k =

Question 1 What are the limitations of management accounting? Question 2 Explain the significance of financial analysis Question 3 What are the advantages of the value a