Question

Compare and contrast the objective of maximizing earnings per share with that of maximizing wealth.

Answer 1

There are various differences in objectives of maximizing the earnings and maximizing the wealth-

A) maximizing the earnings of the company is focused at a small number of stakeholders most probably including management and the shareholders, but maximizing of the the value of the organisation will be helpful for the other stakeholders in the company as well.

B)maximization of the earning of the company the short-term concept while maximization of the value of the companies a long term concept

C) maximization of profits and earning is focused at just monetary benefits but maximization of value at non monetary benefits also

D) maximization of profit does not consider the protection of interest of various shareholders and stakeholders, but maximization of value will always be looking for protection of interest of its stakeholders

E) maximization of earning is leading to various conflicts between management and shareholders, whereas maximization of value would not lead to conflict of interest

F) maximization of earning can induce management to manipulate the books of account but maximization of value will motivate the management to work in the benefits of the organisation.