Question

The ultimate goal of all financial decisions is “to maximize the value of shareholders”. With your knowledge in Strategic Finance Issues, how true is this statement and how can financial manager practically achieve the “shareholder value maximization goal” through the decisions they take? You may use the balance sheet model to explain.

Answer 1

The ultimate aim of all the financial decision is to maximize the value of the shareholders because shareholders are the owners of the company and business is always trying to fulfill the expectation of the shareholders by maximizing their value and all the decisions are taken in perspective of the shareholders in order to help them to appreciate their overall capital.

This is a true statement as maximization of shareholder value has a importance but maximisation of value of Organisation has a higher importance because value maximization concept that has long term implications and it is a sustainable concept because organisation is trying to achieve long-term sustainability rather than short term profitability so value maximization is often a better management strategy because it is leading to higher profits for the company in the long run so value maximization is about all the stakeholders of the organisation where as share holders maximization is just concentrated at the share holders maximization and value maximization is basically about maximization of the stakeholders worth ratherthan shareholders worth