Goals of firm business finance

Goals of firm business finance.

1. Goals of the firm Presented by Rishi Ram Khanal BIM (TU) Roll no:108

2. Content Introduction Profit maximization Weaknesses of Profit maximization Wealth Maximization Shareholders' wealth maximization

3. introduction This topic introduces the area of finance and discusses the role of finance managers in companies  the main objective and mission of the company in maximizing the wealth of the shareholders

4. Profit maximization, sales maximization, cost minimization, service maximization, wealth maximization etc. Major goals are: Profit Maximization Wealth Maximization

5. Profit Maximization Business firms are the economic institutions & their primary goal is to increase profit. Reasons: a. Maximization of the firm’s earnings. b. An indication of success of business firm. c. It indicates efficient utilization of various resources. d. Profit is better incentive to work. e. Firm can take part in different social activities. f. It increases the competitive strengths of the firm.

6. Weaknesses of Profit maximization: Goal is not clear Ignores time value of money Ignores risk factor Ignores social responsibilities

7. Wealth Maximization This goal emphasizes to increase in wealth position of shareholders through the value maximization of firm. The value of the firm is maximized when the net present value (NPV) is increased. NPV= Total present value- Initial investment. = TPV – I

8. Shareholders' wealth maximization It is a superior goal of the firm than profit maximization due to following reasons : a. Wealth maximization goal is clear b. It considers time value of money b. It considers risk factor c. It considers Quality of cash flow d. It considers macro perspectives

9. Any questions ? Thank you