Shareholder Wealth Essay

The primary objective of the manager is to please the stockholder by maximizing stockholder wealth.

1. Discuss the nature of stock as an investment. Do most stockholders play large roles in the management of the firms in which they invest? Why or Why not?

The main aim of the managers that run the corporations is to maximize the wealth of shareholders. Research indicates that many corporation managers especially in the US target increasing the wealth of the shareholders. This is basically achieved through the increasing the profits made by these corporations.

This ratio indicates whether it can respond to the current liabilities by using current assets. As many times, we can cover short-term obligations, as better for the company. This indicates that significant and high improvement in the liquidity. The increase in the current ratio 11.5 % will result in an increase in current assets where the current liabilities increased by 2.1%.

According to Gitman, the goal of the firm, and therefore of all managers and employees, is to maximize the wealth of the owners for whom it is being operated (2009). The financial manager is responsible for acquiring sources of financing and allocate amongst competitive investment alternatives. The ultimate goal is to invest in projects yielding higher returns than amount of financing used to invest, so profits can be used satisfy claims and increase shareholder wealth. The issues facing financial managers are therefore to 1) increase sources of financing from investors and 2) increase shareholder wealth while maintaining a

6. The goal of shareholder wealth maximization model is to maximize the return to shareholders, and it is measured by the value of the firm’s common stock. It is also concerned with minimizing the risk to the shareholders’ bonuses. The model looks at the present value of all expected future cash flows (McGuigan, Moyer, & Harris, 2011, p.8).

The scope of the financial management is to secure the capital needed by the enterprise, and

Financial management is a work plan that details the revenue and expenses of a company. Financial decisions are strategies that achieve the financial objectives of a company that include capital budgeting, capital structure, and working capital management. Modigliani and Miller (1958) received the Nobel Prize in economics for their study of the relationship between capital structure and corporate value, with and without corporate tax. Whether financial management decisions influence firm value is still debated daily because there are plenty of uncertain factors. In this paper, I intend

Most corporate financing decisions in practice reduce to a choice between debt and equity. The finance manager wishing to fund a new project, but reluctant to cut dividends or to make a rights issue, which leads to the decision of borrowing options. The issue with regards to shareholder objectives being met by the management in making financing decisions has come to become a major issue of recent times. This relates to understanding the concept of the agency problem. It deals with the separation of ownership and control of an organisation within a financial context. The financial manager can raise long-term funds internally, from the company’s cash flow, or externally, via the capital market, the market for funds

(ii) Shareholders invest their money into firms to maximise profits, not to act on “social responsibilities”

1. Brigham, Eugene F. and Michael C. Ehrhardt. Financial Management Theory and Practice, 13th Edition, Thompson South-Western, ISBN-13# 978-14390-7809-9, ISBN-10#1-4390-7809-2

REFERENCES•Ross, S.A., Westerfield, R.W., Jaffe, J., Jordan, B.D. "Modern Financial Management". McGraw-Hill, Eighth Edition, (2008)•R.A. Brealey and S.C. Myers, "Principles of Corporate Finance", McGraw-Hill, Seventh Edition, (2003).

Social responsibility is the future. Investors always have to think about the future. Many people are concerned about the environment and what will happen to the environment in the future. Socially responsible investing is getting increasingly popular. The social responsibility project will come from Canadian tire. This company has many projects to help the community and is very widespread to help many people. Canadian tire is very known in Cape Breton for helping children and even kittens. In early 2014, Canadian Tire were in news stories for taking in abandoned kittens and let them live in the store creating a bigger, more happier fan base of the company. This project will take five percent of profit and use it to be socially

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.

Nevertheless if companies operate in weak markets and fail to create growth and profit the concept of maximization of shareholder wealth is also an opportunity for self-regulation and security against threats for a company. This approach is in particular useful for safeguarding against difficulties arising from wrong or misguided leadership within a corporation. Shareholders of a company have the strongest interest in a company’s success because they often invest a lot of capital in the business and require revenues for their deposit (Moore, 2002). As a matter of fact, they become more