The primary goal of finance in corporate organizations is the maximization of shareholders’ wealth.

The primary goal of finance in corporate organizations is the maximization of shareholders’ wealth. Using the balance sheet model of the firm, demonstrate how this goal can be achieved.

Expert Solution

The primary goal of finance in corporate organisation is the management of the shareholders wealth because finance in an organisation will always be inclined to the overall maximization of the shareholders wealth because shareholders wealth means the maximization in the value of the company in the long run and it is a much wider concept then the profit maximization because profit maximization is only inclined towards maximization of the profit in the short run, and it has nothing to do with the long-term prospective the company.

So there should always be a focus at wealth maximization or the value maximization which is also termed that shareholders maximization which is a long-term philosophical concept which is aimed at maximization of the total value of the shareholders which will be beneficial in the long run of the company and it is much wider concept than a profit maximization.

Balance sheet model of the firm illustrates that the Assets of the company would be equal to the liabilities of the company along with the shareholders equity so there should always be e a focus towards each three element and it is always needed for maximization of the value of the shareholders in the long run because shareholders are also an important part of overall balance sheet model so the share holders equity can only be maximized if the overall balance sheet is expanded and the assets are maximized.

jeff jeffy answered 2 years ago

Corporate Finance Overview along with the issues of Firm's goal - profit maximization vs. wealth maximization...

Corporate Finance Overview along with the issues of Firm's goal - profit maximization vs. wealth maximization and Agency issue.

The goal of "maximization of the shareholders' wealth" is an adequate goal for a project. Do...

The goal of "maximization of the shareholders' wealth" is an adequate goal for a project. Do you agree? If you dont explain your justtification (please explain in detail)

The goal of “maximization of the shareholders’ wealth” is an adequate goal for a project. Do...

The goal of “maximization of the shareholders’ wealth” is an adequate goal for a project. Do you agree? If you don’t, explain your justification. Can you comment on this topic at least 5 pages on MS Word? Thanks.

A major advantage of using the maximization of shareholder wealth as the primary goal of the...

A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers the timing and the risk of the expected benefits to be received the investor's consumption utility the value of closely held partnerships all the above

Currently, maximization of shareholder wealth is widely accepted as the primary goal of management.

Chapter 1 Discussion: Primary Goal of ManagementCurrently, maximization of shareholder wealth is widely accepted as the primary goal of management. However, like most economic theories, certain conditions must exist in order for the theory to accomplish its potential . Now, compare the theoretical world with the real world--if you were in charge of management decisions, how might you balance the theory with reality?

Thinking in terms of the goal of wealth maximization, a project breaks even for shareholders, meaning...

Thinking in terms of the goal of wealth maximization, a project breaks even for shareholders, meaning that it neither creates nor destroys value, if a) its NPV equals 0 b) its IRR equals 0 c) its net profit after taxes equals 0 d) its payback period is one year or less

Why should maximization of shareholder wealth NOT be the primary goal? Hint – A common mistake...

Why should maximization of shareholder wealth NOT be the primary goal? Hint – A common mistake is to address a “strawman” instead of the true goal of maximizing shareholder wealth. This is done in some of the articles referenced above. An example of a “strawman” in this case is saying that maximizing shareholder wealth is focusing on the short-term AT THE EXPENSE of the long-term. Since firm value is the present value of ALL EXPECTED FUTURE CASH FLOWS, strategies that...

Why is the goal of wealth maximization is superior than the goal of profit maximization. Also...

Why is the goal of wealth maximization is superior than the goal of profit maximization. Also explain why profit maximization is a short run goal and wealth maximization is long run goal. please explain in detail.

The purpose of the financial management is to maximize shareholders wealth. What is the meaning of shareholders wealth maximization?

The purpose of the financial management is to maximize shareholders wealth. What is the meaning of shareholders wealth maximization? If a company attempts to maximize its shareholders wealth, is this good or bad for society? Explain by providing some examples. Do you think maximizing shareholders’ wealth also applies in Saudi Arabia?Search the SEU library or the Internet for an academic or industry-related article. Select an article that relates to these concepts and explain how it relates to doing business in...

True or False 1. The primary goal of a corporation is profit maximization. 2. Typically, shareholders...

True or False 1. The primary goal of a corporation is profit maximization. 2. Typically, shareholders are not equity investors. 3. Calculating a present value is a tool we can use to help compare and contrast different investment choices we may have today. 4. When considering a capital structure you are making a choice between debt and equity financing.

Question