Financial Management Techniques The study of Financial Management techniques involves the assumption
that the single objective of commercial entities is the maximization
of firm valuation and shareholder wealth
It could be argued that in financial management the single objective
of commercial entities is the maximization of firm valuation and
shareholder wealth. Different factors need to be considered in order
to discover the extent to which this objective is realistic.
On the question of value in relation to a firm, there are two
viewpoints that might possibly be adopted. The first is that of 'the
firm' as an entity. The second is that of 'shareholders', this is
concerned with maximizing the return on investment to the shareholder
(Amey and Egginton 1973).
Financial management has been described as:
" The art of integrating financial theory and practice to maximize the
value of the organizations to its shareholders and other
stakeholders."
(Werner and Stoner 1995)
It could be argued that in today's business climate the exclusive
objective of maximizing a firm's value and its shareholders wealth is
not realistic. Whilst this objective is still of paramount importance,
there are other factors that a commercial entity must consider. The
'Stakeholder theory' helps to describe this.
The main principle of the Stakeholder Theory is that, the corporation
should be managed for the benefit of its stakeholders not just its'
shareholders. A stakeholder has been described as
"Any individual or group who can affect, or is affected by, the
achieve...
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... Merchant, K. (1990). Accounting for Management
Control (2nd Ed.), Chapman & Hall
Samuels, J.M. (1995). Management of Corporate Finance (6th Ed.),
Chapman & Hall
Shaw, H. (1991). Finance In Organisations, ELM Publications
Van Horne, C.J. (1990). Financial Management & Policy (9th Ed.),
Financial Times - Pretince Hall
Journals
Journal of Applied Corporate Finance
Harvard Business Review
Websites
http://www.opinionjournal.com (Accessed on 31st November 2002)
http://www.investorwords.com/cgi-bin/getword (Accessed on 4th December
2002)
http://www-rohan.sdsu.edu/faculty/dunnweb/pubs.iabs96.html (Accessed
on 4th December 2002)
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[1] http://www.econ.nyu.edu/user/galed/chap01.pdf (Accessed on 1st
December 2002)
Block, S. B., & Hirt, G. A. (2005). Foundations of Financial Management (11th ed). The
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
In contrast , the shareholder theory organisations or organisation's decision-makers only have the responsibility to their shareholders by increasing the organisation profits and should only make the decisions to increase as much as possib...
It outlines the interconnection of a company’s financial and non-financial elements and aims to combine them and show value creation and maintenance. It identifies resources and their effective and responsible usage. It intends to create a dialogue between the shareholders and other stakeholders and provides them with detailed information.
To survive in a very turbulent environment management must set direction for the firm. To successfully change direction, management must have the support of those who can affect the firm and understand how the firm will affect others. The stakeholder approach provides no rival to the traditional aim of “maximizing shareholder wealth.” A stakeholder approach rejects the very idea of maximizing a single objective function as a useful way of thinking about management
When discussing profit maximization and maximization of shareholder equity (i.e. wealth) we must take into account that shareholder equity is responsible for all of the difficulties of the environment. To whereas, profit maximization does not, in other words the profit maximization deals with revenues, it is a measure of business operations. On the other hand shareholder equity deals with or is responsible for the value maximization and the net present worth, therefore, its goal is to provide
The rapid development of media and technology in the world market today has helped companies to sell their products and get in touch with their customers more easily (Rayburn, 2012). However the success of a company depends on many factors, not that only whether it has brilliant advertisement or marketing campaigns. The main aim of a company is to create shareholder’s value which according to Bender and Ward (2008), companies have to manage both well in a trading environment and financial environment in order to do that. Hence, the financial strategy can be seen as one of the most important factors in contributing to the business’s success especially to a large company such as Unilever as it is all about strategic decisions related to raising and manage the funds in the most appropriate manner.
What do you understand by the phrase “stakeholder analysis”? Attempt a stakeholder analysis of an organisation that you are closely associated with.
Lazonick, W., & O'Sullivan, M. (2000). Maximizing shareholder value: a new ideology for corporate governance. Economy and Society, 29(1), 13-35. Retrieved from http://www.uml.edu/centers/cic/Research/Lazonick_Research/Older_Research/Business_Institutions/maximizing shareholder value.pdf
Corporate governance implies governing a company/organization by a set of rules, principles, systems and processes. It guides the company about how to achieve its vision in a way that benefits the company and provides long-term benefits to its stakeholders. In the corporate business context, stake-holders comprise board of directors, management, employees and with the rising awareness about Corporate Social Responsibility; it includes shareholders and society as well. The principles which...
“An attempt to obtain and allocate financial resources effectively and efficiently to achieve the firm's objective; that is to maximize the shareholders' wealth by maximizing share price.”
Financial planning process can be defined as the ability to properly outline goals and assess the possibility of implementing those goals. In other words, it is a projection of where one intends to be and understanding how to arrive at that financial destination. Financial planning process requires flexibility because of the changing nature of our economic environment; therefore, even in defining our goals, a careful attention should be given to identifying and evaluating new choices so that when changes occur, our financial plans can move along with those changes.
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
Financial theories are the building blocks of today's corporate world. "The basic building blocks of finance theory lay the foundation for many modern tools used in areas such asset pricing and investment. Many of these theoretical concepts such as general equilibrium analysis, information economics and theory of contracts are firmly rooted in classical Microeconomics" (Oaktree, 2005)
The Role of the Financial Manager This paper will discuss the role of the financial manager and how that particular role, in the area of corporate expertise, differs from that of the shareholder and of the employee. The discussion the paper provides will help determine how the financial manager maximizes shareholder value in today's financial market. Lastly, the viewpoint of the financial manager will be compared to that of the shareholder and employee. What is a Financial Manager?