Question

What are the two objectives of financial management?

Hint:

Profit maximization = short-term goal; Wealth maximization = long-term sustainable goal.

Answer 1

Step 1: Meaning of financial management.
Financial management refers to the planning, organizing, directing, and controlling of financial activities like procurement and utilization of funds.
Step 2: Objectives of financial management.
1. Profit maximization:
The primary objective is to ensure maximum return for shareholders by increasing profitability.
This is achieved by proper utilization of resources, cost control, and increasing efficiency.
2. Wealth maximization:
Another important objective is maximizing the overall wealth of shareholders.
It focuses on long-term growth and sustainability rather than just short-term profits.
Step 3: Conclusion.
Thus, the two main objectives of financial management are to maximize profit and maximize the wealth of shareholders.