Purchase Solution

The goal of finance

Not what you're looking for?

Ask Custom Question

The goal of finance is to maximize shareholder wealth, not to maximize profit. Can anyone tell me why these two goals are different, and why one is preferred over the other?

Purchase this Solution
Solution Summary

This solution discusses the differences and reasons for preference for maximum shareholder wealth vs. maximizing profit.

Solution Preview

The major difference between the profit maximization goal and the goal of shareholder wealth maximization is that the latter goal deals with all the complexities of the operating environment, while the profit maximization goal does not. The major factors assumed away by the profit maximization goal are uncertainty and the timing of the returns.

The goal of shareholder ...

Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • Career plans

    Also, the traits of being efficient, outgoing, and energetic are helpful. Finally, the trait of being friendly helps. Identify long-term goal, mid-term goal, and short-term goal in order to meet the long-term goal.

  • Management, CFO and Finance Functions

    367069 Management, CFO and Finance Functions What is the primary goal of management. What are the primary tasks of a Chief Financial Officer (CFO) and others in the finance function of an organization. Goals What is the primary goal of management?

  • research, marketing, finance, or organizational behavior

    492625 research, marketing, finance, or organizational behavior What are the differences among the research approaches (and thinking styles) that guide the predominant kinds of studies done in operations research, marketing, finance, and/or organizational

  • Applying finance and budgeting to non-profit organizations

    The basics of budgeting and finance would remain the same for a non-profit organization with the exception of the focus.

  • Stakeholder theory influences core elements of finance

    The stakeholder theory is the primary goal of management, which is stockholder wealth maximization (Brigham & Houston, 2007).

  • Cost of equity

    After all, isn't the goal of the firm to maximize share value (and minimize shareholder costs)? Normally, the cost of equity finance is higher than the cost debt finance, because the cost of equity involve a risk premium.

  • Principles of Finance

    146972 Describe the 10 basic principles of finance. how does these principles relate to the goal of wealth maximization. Describe the 10 basic principles of finance. how does these principles relate to the goal of wealth maximization.

  • Calculate NPV, IRR and maximum initial investment

    This solution provides a detailed step by step explanation of the given finance problem.

  • Which businesses maximize shareholder value?

    When is shareholder maximization the right goal for management and when shareholder maximization is the wrong goal for management to have? Welch I. (2009). Corporate Finance: An Introduction.

View More Related Solutions