Financial Manager needs to create the firm's value that maximizing both shareholder and bondholder value paid to them should be greater than the value invested

Financial Manager needs to create the firm's value that maximizing both shareholder and bondholder value paid to them should be greater than the value invested.

Describe the possible approach or strategies to create the firm's value that will ultimately maximize both the bondholder and shareholders' wealth.

Solutions

Expert Solution

Possible approach and strategy which will create the value of the firm which will ultimately increasing the the wealth of both the bondholder and shareholder are as follows-

A. fair increase in the profitability of the company which has not been increased by manipulation of the books of accounts will help both the stakeholders.

B. Undertaking of such projects which will ensure the sustainability of the company in the long run and it will improve the repayment ability of the company as well for the bondholders and it will improve the shareholders wealth for the shareholder.

C. increasing of the business reputation which will improve the customer base of the company in the long run which will increase the overall ability of the company as it will maximize the market capitalisation of the company as well

D. following up with rules and regulations which are determined by the central government and the other statutory organisations which will help the organisation in ensuring the sustainability in the long run.

E. Lower amount of agency conflict between the shareholders and the bondholders and the management it also important in order to maximize the rate of return of the company.

Hence these are the collective approaches which will synchronise the goals of both the bondholders and Shareholder.

jeff jeffy answered 2 years ago

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