The goal of finance
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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?
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Solution Summary
This solution discusses the differences and reasons for preference for maximum shareholder wealth vs. maximizing profit.
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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 ...
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