Question

In: Finance

The text argues that the goal of management is to maximize the market value of the...

The text argues that the goal of management is to maximize the market value of the stock and the wealth of its stockholders. Argue for or against this position and address whether the welfare of other stakeholders like employees/customers and society as a whole should be considered. Do you see a trend emerging in today's economy?

Solutions

Expert Solution

The goal of the management is always to maximize the overall value of the organisation and wealth of the shareholders, because there is a focus of the management on the value maximization.

There is always a conflict between the profit maximization and value maximization concept and an organisation should always be looking for the value maximization,because the value maximization is a long-term concept and it is a highly philosophical concept that advocate that the company is always looking for the sustainable development in the long run and it is not Looking in for short term approach for profit maximization.

Benefit of this concept is it will help the organisation in overall value maximization in the long run and disadvantage associated with this concept is that there would be loss of the profits on the many times because of the ethical consideration,and the company will not be taking on the profitable projects because of value maximization concept.

In today's economy the organisations are more focused at looking at the overall interest of the stakeholder and always looking for the interest of the organisation as a whole rather than looking for the value of profit, so it is going for value maximization.


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