Why is the primary goal of financial management to maximize shareholder wealth?

Because the maximization of shareholder wealth refers to creating the most wealth for shareholders through reasonable financial management and achieving the financial management goals of the enterprise, which is of positive significance.

Shareholders start a business with the aim of growing their wealth. They are the owners of the business, the provider of corporate capital, and the value of their investment lies in the fact that it can bring future rewards to the owners, including dividends and equity to obtain cash.

Under the condition of share economy, the wealth of shareholders is determined by the number of shares and the market, so the maximization of shareholder wealth is ultimately reflected in the world.

The stock price represents the objective evaluation of the value of the company by the investing public. It is expressed in ** per share, reflecting the relationship between capital and profit; It is affected by earnings per share, which reflects the size of earnings per share and the time it was obtained; It is affected by the size of the company's risk and can reflect the risk of earnings per share.

This view of shareholder wealth maximization holds that enterprises are mainly formed by shareholders' capital contributions, and shareholders start enterprises with the purpose of expanding wealth, they are the owners of enterprises, and it is natural that the development of enterprises should pursue the maximization of shareholder wealth.

Under the condition of joint-stock economy, the shareholder wealth is determined by the number of the company and the market, under the premise of a certain number, when the highest shareholder wealth also reaches the maximum, so the shareholder wealth can be maximized.

Shareholder wealth maximization has its positive aspects:

First, the concept is clear. Shareholder wealth maximization can be measured by the market price;

second, the time value of the money is considered;

Third, the risk factors are considered scientifically, because the level of risk will have an important impact on the ****;

Fourth, the maximization of shareholder wealth can overcome the short-term behavior of enterprises in the pursuit of profits to a certain extent, because not only the current profits will affect the company, but the expected future profits will also have an important impact on the company;

Fifth, the goal of maximizing shareholder wealth is relatively easy to quantify, which is easy to evaluate and reward and punish.

What's the reason for this.

This is because the shareholder wealth maximization goal has three advantages over the profit maximization goal: it considers cash flow.

Time value and risk factors, overcoming short-term behavior in pursuit of profits, shareholder wealth reflects the relationship between capital and earnings. Through the analysis of the enterprise investment vehicle model.

It can be seen that the goal of shareholder wealth maximization is the criterion for judging whether the financial decisions of a company are correct. Shareholder wealth is maximized to ensure that other stakeholders are secured.

interests as the premise. Let's do a quiz before studying, click on the test, I am not suitable for studying accounting.

Maximizing shareholder wealth refers to bringing the most wealth to shareholders through financially sound management. Scholars who hold this view believe that shareholders start businesses with the goal of growing wealth. They are the owners of the business, the providers of the capital of the business, and the value of their investment lies in the fact that it will bring future rewards to the owners, including dividends.

and ** equity to obtain cash.

Under the conditions of the share economy, the wealth of shareholders is determined by the number of shares they own and the market, and they believe that the stock price represents the objective evaluation of the value of the company by the investing public. It is expressed in ** per share, reflecting the relationship between capital and profit; It is subject to earnings per share.

the impact of earnings per share, reflecting the size of earnings per share and the time it was obtained; It is affected by the size of the company's risk and can reflect the risk of earnings per share.

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Hello, the primary goal of financial management is to maximize the wealth of shareholders, the reason is that the wealth of shareholders is the most large, representing the rational operation of financial management, shareholders are investors in the company, investors can effectively benefit, it represents the correctness and effectiveness of financial management. Shareholders are the owners of the enterprise and the supplier of capital for the company's auction, and the purpose of shareholders' investment is to obtain the value brought by the company's profits. Hope it helps.

Wishing you a happy life!

Merit. 1. The concept is clear. Shareholder wealth maximization can be measured by the market price;

2. The time value of funds is considered;

3. Scientifically consider the risk factors, because the level of risk will have an important impact on the ****;

4. The maximization of shareholder wealth can overcome the short-term behavior of enterprises in the pursuit of profits to a certain extent, because not only the current profits will affect the company, but also the expected future profits will have an important impact on the company;

5. The goal of maximizing shareholder wealth is relatively easy to quantify, which is convenient for assessment and reward and punishment.

Disadvantages: 1. It is only applicable to listed companies, and it is difficult to apply to non-listed companies. As far as China's current national conditions are concerned, listed companies are not the main body of Chinese enterprises, so in reality, the maximization of shareholder wealth is not yet suitable as the goal of China's financial management.

2. Maximizing shareholder wealth requires that the financial market be efficient. Due to the dispersion of the best and the asymmetry of information, managers may make adverse choices at the expense of the interests of shareholders in order to maximize their own interests.

3. In addition to being affected by financial factors such as digging ears, **** is also affected by other factors, and **** can not accurately reflect the business performance of the enterprise. Therefore, the goal of maximizing shareholder wealth has been questioned by the theoretical community.

<> for listed companies, the number of shareholders and the market determine the wealth of shareholders. When the number is constant, the higher the shareholder's wealth; When it is at its highest, shareholder wealth is at its maximum.

The benefits of maximizing shareholder wealth.

1.Risk factors are taken into account. Shareholder wealth = ** quantity.

In most cases, the quantity remains the same, and the impact of **** on shareholder wealth needs to be considered. Many factors can affect the world, such as risk factors. Risk factors are taken into account when maximizing shareholder wealth in reality.

2.To a certain extent, it can avoid short-term behavior of enterprises. For example, Company A is a listed company, and its annual report discloses a loss of 100 million.

The reason for a loss of 100 million yuan is that company A invested 200 million yuan in research and development of new technologies, and it is expected to make a profit of 1 billion in the next 3 years. This shows that the growth is very good. Factors that affect the future include expectations for the future, if the growth is good, investors have confidence in the future of the company, ******.

In this regard, short-term corporate behavior can be avoided.

3.For listed companies, the goal of maximizing shareholder wealth is relatively easy to quantify, which is convenient for assessment and rewards and punishments.

Disadvantages of maximizing shareholder wealth.

1.It is difficult to apply to non-aerial posture land city companies. If a non-listed company does not issue **, the stock price cannot be determined, and the number of shareholder wealth = ** cannot be used.

2.Stock prices are affected by many factors and cannot fully and accurately reflect the financial management status of enterprises. If the overall environment is not good, even if the company's financial management system is perfect, it will drag down ******.

3.Too much emphasis is placed on the interests of shareholders and not enough attention is paid to the interests of other stakeholders. The interests of shareholders are the most important and the interests of other stakeholders are ignored.

For example, Company A is now losing 100 million, but it is expected to make a profit of 300 million in the future. Therefore, the current stock price is high, and the interests of shareholders are valued; However, as far as creditors are concerned, Company A has now lost 100 million yuan and may not be able to repay the money it borrowed in the past. Ignoring the interests of creditors.