However, among all these objectives, the main one for business organisations is supposed to be an increase of the value to its shareholders. In this case, the bid to maximize the wealth of its shareholders becomes a fundamental goal of management. It is important to note that investors often anticipate earning satisfactory returns from the investments they establish in the firm.
Shareholders are the actual owners of the business, which means that senior managers are have a responsibility to ensure maximisation of investor’s wealth, not just for the success of the business, but also for continued investments, thus gaining the ability to increase its market share and financial position. Maximizing this wealth can be determined by the payout of dividends as well as capital gains through an increasing market value for a particular share price of the business. In the process of achieving this objective, conflicts can sometimes arise in the business. In this case, business managers may end up making decisions based on their interests and not achieving the investors’ wealth. Therefore, traditional view is that profit maximization needs to be made the ultimate goal and objective for the business.
Financial managers are often involved in managing cash flows on behalf of the companies they work for as well as their respective owners. In any firm, financial management is often concerned with the process of making decisions in three main areas, which include; investing, financing as well as dividend policy. In all these, wealth maximization always remains to be the fundamental goal for the firm. Business managers are expected to ensure that they effectively manage the stock prices for the benefit of their respective shareholders since they are needed towards increasing the financial muscles for the company so that it can achieve its other objectives (Kaen 2003, 87). In this case, the criticisms raised against this