Prime objective of a company shareholders wealth maximization

Firstly, the wealth maximization is based on cash flows and not on profits. Unlike the profits, cash flows are exact and definite and therefore avoid any ambiguity associated with accounting profits. There is a change in method of depreciationthere is a change in profit. It is not the case in case of Cashflows.

Components of total costs: It consists of direct material direct labour and direct expenses. It is also known as basic or first or flat cost. It comprises prime cost, in addition factory overheads which include cost of indirect material indirect labour and indirect expenses incurred in factory.

This cost is also known as works cost or production cost or manufacturing cost. In office and administration overheads are added to factory cost, office cost is arrived at. Selling and distribution overheads are added to total cost of production to get the total cost or cost of sales.

A unit of quantity of a product, service or time in relation to which costs may be ascertained or expressed.

Prime objective of a company shareholders wealth maximization

A future contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Future contracts are standardized exchange traded contracts.

An option gives the holder of the option the right to do something. The option holder option may exercise or not. A call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price.

A put option gives the holder the right but not obligation to sell an asset by a certain date for a certain price. Option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium.

The date which is specified in the option contract is called expiration date. It is the option at exercised only on expiration date itself. Basis means future price minus spot price.

4 Main Financial Objectives of Business Firm

The relation between future prices and spot prices can be summarized in terms of what is known as cost of carry. This is somewhat lower than initial margin.

This is called mark to market. Impact cost is cost it is measure of liquidity of the market.

Prime objective of a company shareholders wealth maximization

It reflects the costs faced when actually trading in index. Hedging means minimize the risk.

Increased Returns

Capital market is the market it deals with the long term investment funds.A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being—this may include maximizing social impact alongside profits for external shareholders.

Social enterprises can be structured as a for-profit or non-profit, and may take the form (depending in . Wealth maximization is almost universally accepted and appropriate goal of a firm. According to wealth maximization, the managers should take decisions that maximize the net present value of the shareholders or shareholders’ wealth.

The wealth maximization principle implies that the fundamental objective of a firm is to maximize the market value of its shares. The Smith Manoeuvre – Is your mortgage tax deductible?. The Smith Manoeuvre is an efficient strategy to use equity in your home to invest .

Glossary of research economics

An exploration of the nature and history of capitalism. Global capitalism, colonies and Third-World economic realities. United States corporate law regulates the governance, finance and power of corporations in US state and territory has its own basic corporate code, while federal law creates minimum standards for trade in company shares and governance rights, found mostly in the Securities Act of and the Securities and Exchange Act .

Maximization of shareholder's wealth is the most ideal corporate objective for governing the company amongst all other available alternative options and therefore, feasible for managers looking to implement or formulate strategies.

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