Question

The proper aim of financial management is wealth maximisation.

Answer 1

This statements is 'True' because of the following reasons:
(i) According to Prof. Soloman Ezra, the ultimate goal of financial management should be the
maximisation of owner's wealth.
(ii) Maximisation of profit is unreal and half motive.
(iii) Wealth maximisation is also known as "value maximisation"
(iv) It means maximising net present value of a firm.
(v) So the focus of financial management is on wealth management of its owners, i.e., suppliers of equity capital.
(vi) The market value of the shares reflects the wealth of shareholders.
(vii) So wealth maximisation means the maximnisation of market price of shares.
(viii) The wealth of equity shareholders is maximised only when market value of equity shareholders is maximised.
(ix) So the proper aim of financial management is wealth maximisation of owners wealth.