Shareholder Wealth

2041 words 9 pages
`“Critically assess how finance managers can, in practice, contribute to the maximisation of shareholder wealth”.

This essay will examine how finance managers in day to day practice can participate in the aid of increasing maximum shareholder wealth. The focus point of this is based on the financial managers themselves, how they can manipulate and change things in order to increase shareholder wealth using certain tools and methods of analysis.

Shareholders are deemed as the owners of the business. Their main aim is to increase their wealth, finance managers are employed to achieve this aim. In order to maximise shareholder wealth it would mean “Maximising the flow of dividends to shareholders through time – there is a long term
…show more content…

The only downfall to shareholders is when there are new projects being created it would have effects on the dividend payouts. However with the use of investment appraisal decisions, the finance manager can assess cost of projects that are long term.

Making decisions is important for a finance manager. A finance manager must ensure that they make the right decision at the right time when it comes to investing money into a company. For a manager to come up with the right investment decision there are a number of tools open to managers to aid them in their decision, a key tool is the investment appraisal technique. The investment appraisal technique has in itself a number of different techniques which aid the manager with information and therefore let them know if it’s the right decision to invest. The different ways open to a manager involve calculating the net present value, assessing the capital structure, gearing and discounted cash flow.

“The net present value of an investment (project) is the difference between the sum of the discounted cash flows which are expected from the investment and the amount which

Related

  • Agency Costs and Financial Decision-Making
    2234 words | 9 pages
  • Distinguish Between Shareholder and Stakeholder in a Business Context. Comment on the Influence of Shareholders on the Management of a Company and Its Allocation of Rewards.
    2190 words | 9 pages
  • Baumol
    1334 words | 6 pages
  • Financialization: Stock Market and Share Buy-back Strategy
    1418 words | 6 pages
  • Which Stakeholders Can Currently Be Considered to Be Part of the “the Company” for the Purpose of the Director's Duty to Act in the Best Interests of the Corporation?
    1669 words | 7 pages
  • The Bible And Corporate Finance
    2055 words | 9 pages
  • Purinex, Inc
    2942 words | 12 pages
  • Blaine Kitchware
    1170 words | 5 pages
  • Exxonmobil Corporate Social Responsibility
    2365 words | 10 pages
  • Applied Corporate Finance - Final Questions
    1573 words | 7 pages