Question

Describe each of the four primary financial objectives of firms.

Answer 1

The Four main financial objectives are:

1. Profit maximization

2. Wealth maximization

3. Value maximization

4. Other maximization

Explanation:

1) Profit Maximization:

Profit has an objective has emerged from over a century of economic theory. The profit maximization became the income of the owner.

2) Wealth Maximization:

Wealth maximization means maximization of net present value of a course of action. A financial position which has a positive net present value creates wealth is desirable.

3) Value Maximization:

The goal of the firm is to maximize the present wealth of the owners I.e.,equity shareholder in a company. The primary goal for the company form of organization is to maximize the market value of equity shares of the company.

4) Other Maximization:

The interest of the company are best served by the maximization of sales revenue, which bring with it the benefits of growth, market share and status.