Finance > QUESTIONS & ANSWERS > Lecture 1.3- Financial Management 2023 Update Solution a+ (All)
Lecture 1.3- Financial Management 2023 Update Solution a+
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Goal of Financial Management - Make money for its owners: Maximize the current stock price to increase the wealth of the owners of the firm. Maximize the current market value per share of company's ... stock will increase share price and make shareholders richer. How to achieve goal of financial management? - 1. Maximize profit 2. Minimize cost 3. Maximize market share 4. Maximize current value of company's stock Maximize Profit - Profit in income statement is only accounting profit as there are noncash items. Long-run or short-run profits. Minimize Cost - May decide to minimize cost by not purchasing new asset or delaying maintenance, but this may not be in the best interest of owners. Maximize Market Share - Huge market share with positive earnings to make owners happy. Not all companies with huge market share have positive earnings. Maximize Current Value of Company's Stock - Stock prices incorporate expectations about the future of company and consider the trade-off between short-run and long-run profits. [Show More]
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