- 25 Marks
FM – L2 – Q4 – Financial Objectives
Justify and criticize the assumption that a company's objective is to maximize shareholder wealth
Question
(A)
Justify and criticize the usual assumption made in financial management literature that the objective of a company is to maximize the wealth of the shareholders. (Do not consider how this wealth is to be measured.)
(B)
Outline other goals that companies claim to follow, and explain why these might be adopted in preference to the maximization of shareholder wealth.
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