Managerial Finance W1Guidance C1 2 92517in Other (Other) by dgp
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Managerial Finance W1Guidance C1 2 92517
The goal of profit maximization is too simplistic in that it assumes away the problems of uncertainty of returns and the timing of returns. Rather than use this goal, we have chosen maximization of shareholders wealththat is, maximization of the market value of the firms common stockbecause the effects of all financial decisions are included. The shareholders react to poor investment or dividend decisions by causing the total value of the firms stock to fall and react to good decisions by pushing the price of the stock upward. In this way, all financial decisions are evaluated, and all financial decisions affect shareholder wealth.
In an efficient market, information is impounded into security prices with such speed that...