Question

Compare and contrast the objective of maximization earning with that of maximizing wealth?

Financial management is the study of financial decision making, leading towards the achievements of desired goals of the firm comments?

In finance we assume managers seek to maximize the value of the firm. Why is this a desirable objective?

Compare and contrast the objective of maximization profit with that of maximizing wealth?

Please answer this questions

Answer 1

Financial Management is made on the concept of utilization of fund for the growth of business and firm , the growth can be measured in term of either profit maximization or wealth maximization.

Parameters	PROFIT MAXIMIZATION	WEALTH MAXIMIZATION
Objective	to earn a larger amount of profit.	to improve the market value of its shares.
Purpose	short term	long term
Risks and Uncertainty consider	generally No	Yes
calculate	operational efficiency	large market share.
Pattern of Returns	No	Yes

Answer b) The Managers always use the concept of financial management for decision making , which leads to achievement of all desirable goals in financial terms.

the financial goals are always link with management of fund and flow of fund , the flow of funds are managed by use of concept and theories of financial management.

Answer c) maximization of wealth, which increase the market value of the firm by all the means , like regular profit making , dividend payment , debt interest payment , efficiency of firm and many more.

value maximization indicates that financial managers work for increase market value in long run of the firm. The Total market value is combination of all the market claims of company — like equity, debenture, preferred shares and any thing.