Question:
Statement 1: The objective of financial management is to maximize shareholders' wealth.
Statement 2: The shareholders gain if the value of shares in the market increases.
Choose the correct option from the following:
Statement 1: The objective of financial management is to maximize shareholders' wealth.
Statement 2: The shareholders gain if the value of shares in the market increases. Choose the correct option from the following:
Statement 2: The shareholders gain if the value of shares in the market increases. Choose the correct option from the following:
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Financial decisions should be aimed at enhancing the firm's valuation and providing better returns to shareholders.
Updated On: Feb 20, 2025
- Statement I is true and Statement II is false.
- Statement II is true and Statement I is false.
- Both the Statements are true.
- Both the Statements are false.
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The Correct Option is C
Solution and Explanation
Step 1: Understanding Financial Management Objectives
The primary goal of financial management is to maximize shareholders' wealth by increasing the company's market value.
Step 2: Evaluating the Statements
- Statement I is true because financial management focuses on wealth maximization through optimal financial decisions.
- Statement II is also true as an increase in market share price directly benefits shareholders by raising their investment value.
Conclusion: The correct answer is (mathbf{(C)}), as both statements accurately describe financial management objectives.
The primary goal of financial management is to maximize shareholders' wealth by increasing the company's market value.
Step 2: Evaluating the Statements
- Statement I is true because financial management focuses on wealth maximization through optimal financial decisions.
- Statement II is also true as an increase in market share price directly benefits shareholders by raising their investment value.
Conclusion: The correct answer is (mathbf{(C)}), as both statements accurately describe financial management objectives.
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