The Goals of Financial Management

The goals of financial management lie in the value of the company. The way a company is valued is not only found in the money that the company earns. A company has increased value with the length of time it has been open and it's earning trends over time. It also has a history to be considered which tells about the company's reliability in financial reporting. Financial management has to think about all of these aspects when making decisions because any impacts on financial factors can affect the way the company is looked at by investors. Investors are needed to keep a company running and growing. Shareholders have concerns about the way the company is being run with their money, and rightfully so. Financial management has to consider the opinions of the shareholders while making decisions. Maximizing shareholder wealth means looking more at the long-term value than the short-term since fluxes occur on a daily basis in the stock market. Financial management needs to make decisions that will increase profits to keep the stockholders earning money from dividends, looking at all aspects of company value. Management may be tempted to look out for preferred groups inside the company instead of stockholders. As a deterrent to this situation, often time the management will hold stock. The best way to ensure the future of the company is to ensure the confidence of investors by listening to the stockholders' concerns.

...