Objectives Of Financial Management

22When it comes to apprehending with procurement, the use of funds financial management is the answer. It provides a frame work of selecting an appropriate course of action and deciding a practical commercial strategy. The main objectives of financial management is to use business funds to expand their business by maximizing their earnings and the value of the firm therefore they aim to maximize the economic welfare of the business owner’s. The objectives of financial management is divided into two parts; the wealth maximization and profit maximization.

The objectives financial management when it comes to profit maximization is gaining the proceeds. A company must make profits to cover its expenses, and allows the mother company to grow. Remember, no business can exists without generating the income. Profit maximization is a measure of the competence of a business enterprise will also serve as a guarantee against any risk that they have no guarantee to overcome the expenses.

The total profit allows the company to cope with risks, including competition from other companies, falling prices and bad public policy. But the main purpose of management financing when it comes to the maximization of profit is considered is the best among other objective of financial management. In addition, according to the economist that the time that the maximum benefits of recovery is the sole objective of all business establishments because it will lead to optimal allocation of resources. These actions, which increases corporate profits that actions that lower profits will be avoided.

On the other hand, wealth maximization claims that they have the power over profit maximization when it comes to financial benefit of the company because when the company maximizes the stockholder’s income, the individual stockholder or business owner can use this generated income to maximize their individual utility. It simply means that by maximizing their income the company is consistently operating towards maximizing stockholder’s utility. Current largest shareholder holds shares in the company’s product, multiplied by the price per share.23
Wealth maximizations objective helps in increasing estate planning value Ardmore OK & shares in the market where the market share price serves as a performance index and a report card of its progress. It is also indicated how well management is working on behalf of the shareholder or stockholder. However, the maximization of the market price of the shares should be in the long run because every financial decision should be based on cost-benefit analysis. If the benefit is more than the cost, the decision will help in maximizing the wealth.