Briefly explain shareholders wealth maximization objectives in financial management.

The shareholders wealth maximization objective is to maintain highest market value of shares. It is generally in accord with the interests of the various groups such as owners, employees, creditors and society, and thus, it may be consistent with the management objective of survival.

In the shareholders' wealth maximisation criterion a question may arise: Is wealth maximisation the objective of the firm? Does a firm exist with the sole objective of serving the interests of owners? The business firms do not exist with the main objective of maximising the welfare of shareholders. The survival and the future growth of the firm always depends on how it satisfies its customers through the quality of goods and services. Further, the firms in practice set their vision or mission concerned with technology, leadership, market share, image, welfare of employees, etc. Hence, the firm designs its strategy around such basic objectives in the areas of technology, production, purchase, marketing, finance, etc. For this, the firm takes its decisions, which are consistent with its strategies. Therefore, the wealth maximisation objective is the second level criterion, which ensures to meet the minimum standard of the economic performance. As a matter of fact, the management is not only the agent of owners, but also trustee for the owners. Hence, it is the responsibility of the management to harmonise the interests of owners with that of creditors, employees, government, society, etc.

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Share holders wealth maximization two objective :- A. Profit maximization B. Wealth Maximization Profit maximization point are :- 1. The term profit is vague 2. Profit maximization has to be attempted with a realizations risk involved. 3. Profit maximization are objective does not take in to account the time pattern of return. 4. Profit maximization as an objective is too narrow. Wealth maximization the share holders to achive in respect of :- 1. Investment decesion 2. Financing decesion 3. Dividend decesion This is the Brief point shareholders wealth maximization in financial management.

The owners of the organization, seeking for profit, are shareholders. They contribute their investment in expectation of better returns. In return of the investments of the shareholders, the organization, comprising management and the board of directors, strive for maximization of the wealth of the shareholders. This is the prime objective of the organizations seeking profit, besides other minor objectives like better working environment for employees, prompt payment mechanism for suppliers and so on.

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