INTRODUCTION

Financial Management
Hoagland says Financial management is concerned mainly with such matters as how a business corporation raises its finance and how it makes use of it

OBJECTIVES OF FINANCIAL MANAGEMENT

PROFIT WEALTH MAXIMISATION MAXIMISATION APPROACH APPROACH

PROFIT MAXIMISATION APPROACH

Economics since long believed that maximum

profit earning is the sole aim of any business organization Actions that increase the firms profit were undertaken and those that decrease profit were avoided Profit maximization behavior by the firms leads to an efficient allocation of resources and maximum social welfare

RATIONALE BEHIND PROFIT MAXIMIZATION

A business firm is a profit seeking

organization
Profit is a test of economic efficiency It is assumed to lead to efficient allocation of

resources It ensures maximum social welfare

LIMITATION OF PROFIT MAXIMIZATION APPROACH

The concept of profit is vague The profit maximization approach ignores

the time value of money

The profit maximization also ignores a very

important factor(i.e) Risk

WEALTH MAXIMIZATION APPROACH

Wealth maximization means maximization of

net worth of the shareholders The Wealth maximization principle implies that the fundamental objective of a firm should be to maximize the market value of its shares The value of the companys shares is represented by their market price which in turn reflects the profitbilty of the company in the market

STRENGTHS OF WEALTH MAXIMISATION APPROACH

The objective of wealth maximization takes

care of all the limitations of profit maximization approach

It is clear It considers time value of money It considers risk element for evaluation

CONCLUSION
PROFIT MAXIMIZATION WEALTH MAXIMIZATION