The more company ability to generate cash, the more it can distribute to its share holders. In short maximizing share holders wealth is equivalent to maximizing company's price
In order to attract the capital equity easily, many companies focus more on establishing share holder value. Capital equity is especially sensitive in those companies which are seeking to grow, and operates in a risky environment.
The profit margin varies from business to business as the nature and size of the business requires different kinds of resources. The business needs resources for its development and each of this development has a cost to bear. No matter what type of business is your need human and financial resources needed to establish it. It is utmost responsibility of management of any company to provide quality resources at reasonable costs because they play vital role in the business.
Basically reduction in costs or expenses leads to the increase in the current income. Increase in current income means high profit margins. High profits margins brings high yield for the Share holders in the form of dividends and capital restructuring. ...Show more