Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter2: Financial Reporting: Its Conceptual Framework
Section: Chapter Questions
Problem 10GI: Define (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e)...
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Q2) Define the value maximization of firm goal and describe the relationship between this goal and financial decisions.
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Step 1
Value maximization can be also defined as shareholders value maximization. Because the ultimate aim of the value maximization is that to increase the shareholders wealth. So it is the major motive of the manager that to increase the share price by allocating proper funds and proper strategies in business. A high value firm is more stable and investors will like to make their contribution to such firms. Every business needed shareholders contribution for its proper running. So they will consider the factors which are affecting the value of the firm.
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