Question

The basic objective of financial management is _____________.

• A. maximization of profits
• B. profit planning of the organization
• C. maximization of shareholders wealth
• D. ensuring financial discipline in the organization

Answer 1

Answer: (C)

maximization of shareholders wealth

Wealth maximization (shareholders' value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. So, the finance manager must try to maximise shareholder's value.