Why should financial managers strive to maximize? (2024)

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Why should financial managers strive to maximize?

Answer and Explanation:

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What should a financial manager try to maximize?

The main goal of the financial manager is to maximize the value of the firm to its owners. The value of a publicly owned corporation is measured by the share price of its stock. A private company's value is the price at which it could be sold.

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Why is the goal of financial management to maximize the current value of the company's stock?

Answer - Financial management is frequently focused on maximizing the current value of the company's shares, partly because the current value reflects the present value of predicted future cash flows. Maximizing current stock value is consistent with the larger goal of increasing shareholder wealth.

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What can financial managers do to maximize the wealth of its owners?

A goal of financial management can be to maximize shareholder wealth by paying dividends and/or causing the market value to increase.

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What is the goal of a financial manager is to maximize revenues?

TRUE/FALSE & EXPLAIN: The goal of a financial manager is to maximize earnings. FALSE. The goal of the financial manager is to increase the value of the company (increase shareholder wealth). Maximizing earnings is not the same thing.

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What is maximization in financial management?

Wealth maximization in financial management means making smart choices to grow the value of a business, investment, or personal finances over time. It's about making decisions that lead to more money in the long run for shareholders or investors.

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How do you maximize your finances?

These seven practical money management tips are here to help you take control of your finances.
  1. Make a budget. ...
  2. Track your spending. ...
  3. Save for retirement. ...
  4. Save for emergencies. ...
  5. Plan to pay off debt. ...
  6. Establish good credit habits. ...
  7. Monitor your credit.

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Why should the financial manager maximize shareholder wealth rather than profit?

In contrast to a singular focus on profit maximization, the modern goal of financial management in a corporation is typically centered around maximizing shareholder wealth. This goal acknowledges that shareholders are the owners of the company and are interested in the long-term value generated by their investments.

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Why is the goal preferable to the goal of profit maximization?

Profit maximization is an inappropriate goal because it's short term in nature and focus more on what earnings are generated rather than value maximization which comply to shareholders wealth maximization. Wealth maximization overcomes all the limitations that profit maximization possesses.

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What does it mean to say that financial managers should always strive to maximize shareholder wealth subject to ethical constraints?

Maximizing shareholders' wealth subject to ethical constraints means that managers should strive to make maximum company profits while maintaining a firm's moral and social responsibility. When managers attempt to maximize the wealth of shareholders, they, in turn, increase a firm's stock price and value.

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What are the two strategies a manager can use to maximise profits?

Up-sell and cross sell—persuade your customers of the benefits of your more profitable products and pitch additional products. Find new markets—use market research to see if there are opportunities to expand into new areas. Customer service—improve your customer service and develop a staff training program.

How does the financial manager help in achieving the goal of an organization?

Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization.

Why should financial managers strive to maximize? (2024)
What are advantages of wealth maximization?

Advantages of wealth maximization:

Wealth maximization does not depend on profits, which are difficult to define. It depends on cash flows, which are exact and measurable. It considers more environmental factors and has a long-term outlook. It places more emphasis on risk management.

Why is it important to manage finances?

When you start managing your finances, you'll have a better perspective of where and how you're spending your money. This can help you keep within your budget, and even increase your savings. With good personal finance management, you'll also learn to control your money so you can achieve your financial goals.

What are 4 principles of money management?

It is important to be prepared for what to expect when it comes to the four principles of finance: income, savings, spending and investment. "Following these core principles of personal finance can help you maintain your finances at a healthy level".

What are your primary financial goals?

Key short-term goals include setting a budget, reducing debt, and starting an emergency fund. Medium-term goals should include key insurance policies, while long-term goals need to be focused on retirement.

What do financial managers try to maximize and what is their second objective?

The primary objective of financial managers is to maximize the wealth of the firm or the price of the firm's stock. A secondary objective is to maximize earnings per share.

What is the principle of maximization?

Maximization involves determining the change in total benefit and the change in total cost associated with each unit of an activity. These changes are called marginal benefit and marginal cost, respectively.

What are the advantages and disadvantages of wealth maximization?

Pros And Cons Of Wealth Maximisation
  • Helps businesses focus on long-term sustainability.
  • Focuses more on cash flow rather than profits. ...
  • Takes into account the time value of money. ...
  • Considers risk and uncertainty factors while computing the discount rate, leading to more accurate results.
Nov 17, 2023

What are the advantages and disadvantages of profit maximization?

This method can improve the company's financial health and reduce its interest expenses. However, it can also limit the company's ability to invest in future growth opportunities and lead to a decrease in shareholder value. Each profit allocation method has its advantages and disadvantages.

Is it a good goal for managers to attempt to maximize shareholders wealth at the cost of other stakeholders?

To stakeholder theory advocates, an exclusive focus on maximizing stockholder wealth is both unwise and ethically wrong; instead, the firm and its managers have special obligations to ensure that the shareholders receive a “fair” return on their investment, but the firm also has special obligations to other ...

Why do businesses want to maximize profit?

Think of it this way: a firm must make a profit in order to stay in business and remain competitive. Therefore, the money it brings in must be equal all its explicit costs (materials, labour and so on) plus the money needed to remain competitive (known as 'normal profit').

How is profit Maximisation achieved?

Profits are maximised at an output when marginal revenue = marginal cost. this is also where marginal profit is zero.

What might an employer do to maximize profits?

To maximize profits, an employer should control his or her environment in a factory, shop, or office and make sure that examples of energy and efficiency are numerous enough to catch employee attention and establish an atmosphere of industry.

What are the three main tasks of a financial manager?

Financial managers are responsible for the financial health of an organization. They create financial reports, direct investment activities, and develop plans for the long-term financial goals of their organization.


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