Define the term shareholders, Financial Management

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Shareholders

Shareholders are usually assumed to be interested in wealth maximisation. This though involves consideration of potential return and risk. Where a company is listed this is able to be viewed in terms of the share price returns and other market-based ratios using share price (example dividend yield, price earnings ratio, earnings yield).

Where a company isn't listed financial objectives need to be set in terms of accounting and other related financial measures. These may perhaps include earnings per share, gearing, return of capital employed, growth, profit margin, asset utilisation and market share. Many other measures as well exist which may collectively capture the objectives of return and risk. Shareholders may perhaps have other objectives for the company and these can be identified in terms of the interests of other stakeholder groups. Therefore shareholders as a group might be interested in profit maximisation they may as well be interested in the welfare of their employees or the environmental impact of the company's operations.

 


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