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In 150 words, How does the firm maximize shareholder wealth?

In 150 words, How does the firm maximize shareholder wealth?

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Answer #1

The ultimate objective of any investor or shareholder is to maximize shareholders wealth .

Some methods to maximize the wealth are:

  • Increase in Net operating profit
  • Reduction in cost of operation
  • Reduction in agency problem : (there shouldn’t be any conflict between manager and shareholders ,to maximize the wealth )
  • Reduce cost of capital
  • Increase market share
  • Increase in goodwill
  • Increase in intangible asset quality and many more.

Concept of wealth no only explain the profit but can also achive by change in market value of shares.

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