The primary goal of financial management is to maximize the market value of the existing stock.

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True

False

Expert Solution

The correct answer is True

The primary goal of financial management is to maximise the market value of existing stock. For any business the main objective is to earn profits. Financial management helps a business to maximise its profits and manage its expenditures. A company which issues shares to the public must work towards increasing the wealth of shareholders since they are the owners of the company. This is achieved by earning profits and the impact this has is increase in the market value of shares. Thus the existing shareholders are rewarded with greater value to their investment in the form of increase in stock prices.

For example - Suppose a shareholder brought a share for $10 a year ago. The company has performed well in the current year and as a result the share is now trading at $25. Therefore the shareholder is rewarded by way of increase in market value of shares.

jeff jeffy answered 2 years ago

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