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Question
Answer the following question.
State the objective of ' Financial Management '.
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Solution
The primary objective of financial management is ‘Wealth maximisation’ which refers to taking those financial decisions that aim at maximizing the shareholders’ wealth. That is, to opt for those financial decisions that prove gainful from the point of view of its shareholders. Herein, the shareholders are said to gain when the market value of the shares held by them rises, which in turn takes place when the benefits from the financial decisions made by the company exceed the cost involved. When the financial decisions successfully fulfill the objective of wealth maximisation, other objectives such as proper utilisation of funds, maintenance of liquidity, maximisation of profits, and meeting financial obligations are automatically fulfilled.
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