Hi!! I've just been given this essay question, and a little bit stuck on it! Just woondering if there were some pointers anyone fancies giving?? I know, I bet you can't think of anything more thrilling- neither can I!

The assumerd objective for finance when studying this module is: 'the company should make investment and financing decisions with the aim of maximising long term shareholder wealth'. if we accept this as the objective of the firm, explain how finance managers can, in practice, contribute to this aim and evaluate the means and methods that they might adopt.

:) thanks!!

I wish I had other people to do my homework when I was in school.

I wouldn't call it doing my homework, more research on what people have to say, the internet seems the most quick research these days, so I thought I'd try one of these question sites to find more research... :) thanksx

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Originally Posted by katieee_8

hi!!! i've just been given this essay question, and a little bit stuck on it! just woondering if there were some pointers anyone fancies giving?!?! i know, i bet you can't think of anything more thrilling- neither can i!

The assumerd objective for finance when studying this module is: 'the company should make investment and financing decisions with the aim of maximising long term shareholder wealth'. if we accept this as the objective of the firm, explain how finance managers can, in practice, contribute to this aim and evaluate the means and methods that they might adopt.

:) thanks!!!!

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Hi Katiee_8 . I have recently been given the same essay question and would like to know if you got around yours and how. Thank you.

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Originally Posted by katieee_8

i wouldnt call it doing my homework, more research on what people have to say, the internet seems the quickest research these days, so i thought i'd try one of these question sites to find more research.... :) thanksx

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"Research" means going out and trying to find some information concerning the question, not just having someone else answer it for you. Just asking someone else isn't "research." We didn't used to have sites like this - we had to research it ourselves. I agree with karma.

Try to research and put some of your OWN thoughts together first, and then perhaps people here can comment on it or add some thoughts to it.

The concept of maximising shareholders wealth is a broad term and you will need to draw upon different concepts of corporate finance here. One way of maximising shareholders wealth is through the capital structure. There have been theories most notably by MM that there is an optimal capital structure. It should be noted the more debt a company takes on the cheaper is becomes because banks require a less rate of return then shareholders. Yet the more debt taken on the risk increases because higher interest is paid, and shareholders may not get a return because interest must be paid before dividends. So I would look at capital structure.

Another way, in theory, shareholders wealth can be maximised is the dividend policy adopted. If a company chooses to not pay a dividend out and use all the retained funds to fund positive NPV projects then shareholders wealth may increase through capital gains when the share price increases. So look at dividend policy aswel.

Please can you justify and criticise the assumption made in corporate finance that the objective of company is to maximize shareholders wealth

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Originally Posted by michaelmakinde

please can you justify and criticise the assumption made in corporate finance that the objective of company is to maximize shareholders wealth

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Why don't you just read the post above yours?

And if you have further questions, start your own thread. At least this time I caught the date before spending the time reading the whole thing.