Which of the following should be the goal of the financial manager?

to maximize market share

to maximize current stock value

to maximize profit

to maximize earnings

Solutions

Expert Solution

The correct option is

To maximize current stock value

The goal of a financial manager is to maximize the wealth of shareholders as he acts as an agent of the shareholders. The wealth of the shareholders is measured by the value of the firm and the stock price.

Maximizing market share may increase revenues but may not maximize the wealth of shareholders. Maximizing profits may result in taking up high-risk projects which will again decline the wealth of shareholders. Maximize earnings again may result in taking up high risk projects which will decrease the share price and value of the firm rather than increasing the wealth of shareholders.

jeff jeffy answered 1 year ago

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