Objectives of Financial Management
The primary and most important objective of financial management is to maximize the wealth of equity shareholders, which means maximizing the market price of equity shares. This is because the company’s fund belongs to the shareholder. Market price of equity shares increases if the benefits derived from a decision exceed the cost involved. So, all the financial decisions are made to make some profit. So that the market price of equity shares is maximized.
For example, financial management not only makes decisions about investing in new machines, but also takes care of the fact that the benefits from the investment exceed the cost. Therefore, there might be a few projects for the improvement of the market price of the share. Further, when finance is acquired, the management focuses on diminishing the cost, so that the value addition is even greater.
Role and Objectives of Financial Management
We all know that finance is essential for running a business. Business enterprises require careful financial planning and understanding of the resultant capital structure, risks, and profitability that they may have. All these have an effect on shareholders as well as the employees. They require an understanding of business finance, major financial decision areas, financial risk, and the business’s working capital requirements. The success of a business depends on how well finance is invested in assets and operations and how timely and cheaply the finance is arranged from different sources.
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