0
What is meant by the goal of maximization of shareholder wealth?
Wiki User
∙ 13y ago
Suppose a stock holder buys a stock at $10 and in ten years time the market price of stock shoots up to $55.
This is called maximizing shareholders capital.
From Barry D.
Maximizing Sharholder Wealth refers to the process by which executives in a pulically-owned company, usually, (but also to private companies with shareholders), undertake investing in new projects, maximizing profits from existing products and services, controlling costs, and adding "value" to the company through the process, which hopefully gets reflected in the price of the stock, but alwasy in the increase in Net Asset Value and Equity Per Share.
Sometimes simply selling the company for a premium over the existing price or Asset Value results in Maximizing ShareholderWealth.
Hope this helps,
Barry
Wiki User
∙ 13y ago
Add your answer:
Earn +20 pts
Would management pursue goals other than shareholder wealth maximization?
Of course yes, but maximizing shareholder wealth would be the primary goal of any organization that has shareholders.
What should the management of Sports Products Inc pursue as its overriding?
Current theory asserts that the firms' proper goal is to maximize shareholders' wealth, as measured by the market price of the firm's stock. A firm's stock price reflects the timing, size and risk of the cash flow that investors expect a firm to generate over time. So financial managers should undertake only those actions that they expect will increase the value of the firm's future cash flow. Theorical and empirical arguments support the assertion that managers should focus on maximization shareholder wealth. Shareholders of a firm are sometimes called residual claimants, meaning that they have claims only on any of the firm's cash flows that remain after employees, suppliers, creditors, governments and other stakeholders are paid in full. As you see, shareholders stand at the end of this line so if the firm cannot pay the stakeholders first, shareholders receive nothing! Shareholders also bear most of the risk of running the firm. So if firms did not manage to maximize shareholders wealth, investors would have little incentive to accept the risks necessary for a business to succeed.
What is difference between goal aim objective?
Objective is that it must be meet. A goal is what you plan to achieve unless it is a mandatory goal then that goal become an objective because it must be met.
What is the difference between a long-term goal and a short-term goal?
A long-term goal is reached further in the future.
What are the steps in the goal setting process?
Ask yourself the following questionsIs this my goal or is it a goal someone else set for me?Can I clearly define my goal? Is it specific?Is this goal challenging yet attainable?Am I committed to following through with this goalCan I set a deadline for this goal?If you can answer all the questions above then it is time to write your goal down. Once that is done, break your goal down into little steps or sub goals that you can tackle one at a time. Track your progress and move forward.
What is meant by the goal of maximization of shareholders wealth?
The goal of maximization of shareholder wealth is meant by; first, in most cases
How does the goal of maximization of shareholder wealth deal with the problems?
How does the goal of maximization of shareholder wealth deal with uncertainty and timing?
How does the goal of maximization of shareholder wealth deal with those problems?
How does the goal of maximization of shareholder wealth deal with uncertainty and timing?
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization because?
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization
Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization?
Outline how an agency problem can interfere with the implementation of the goal of shareholder wealth of maximization
Maximization of shareholder wealth as a goal is superior to profit maximization because?
it is operating cost
What is the agency problem and how might it impact the goal of maximization of shareholder wealth?
The agency problem is a result of the separation between the decision makers and the owners of the firm. As a result managers may make decisions that are not in line with the goal of maximization of shareholder wealth.
What is the difference between profit maximization and wealth maximization?
Shareholder wealth (more commonly referred to as shareholder value) is talking about the value of the company generally expressed in the value of the stock. Profit maximization refers to how much dollar profit the company makes.
Would management pursue goals other than shareholder wealth maximization?
Of course yes, but maximizing shareholder wealth would be the primary goal of any organization that has shareholders.
Explain the rationale for selecting shareholders wealth maximizatio as the objective of the firm?
Explain the rationare for selecting shareholder wealth maximization as the objective of the firm.Include a consideration of profit maximization as an alternative goal
Why is adjusting the WACC upwards consistent with the overall corporate goal of shareholder wealth maximization?
why? isn't it to adjust it downwards to max. shareholders wealth?
The shareholder wealth maximization goal state that management should maximize the percentage value of the future returns to the owners of the firm?
owners of the firm
