1 When a firm follows wealth maximization goal, it achieves maximization of market value of a share. Do you agree? Substantiate your arguments
Answer:- Explain Wealth maximization
The term wealth means shareholder’s wealth or the wealth of the persons those who are involved in the business concern. Wealth maximisation is also known as value maximisation or net present worth maximisation. This objective is an universally accepted concept in the field of business.
Wealth maximisation is possible only when the company pursues policies that would increase the market value of shares of the company. It has been accepted by the finance managers as it overcomes the limitations of profit maximisation.
The following arguments are in support of the superiority of wealth maximisation over profit maximisation:
ï‚· Wealth maximisation is based on the concept of cash flows. Cash flows are a reality and not based on any subjective interpretation. On the other hand, profit maximisation is based on accounting profit and it also contains many subjective elements.
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