Financial Managers Need Only Concentrate on Meeting the Needs of Shareholders - No Other Group Matters
MANAGEMENT OF BUSINESS FINANCE-
“Financial Managers need only concentrate on meeting the needs of shareholders - no other group matters”
Discuss the above statement using practical examples to support you answer.
Contents Page
Introduction 1-2
Formulas: Profitability 2-3 Liquidity 4-5 Investment 5-6
Summary of Widgets Finical Ratios: Profitability 6-8 Liquidity 8-9 Investment 9-10
Conclusion 10
Bibliography 11
Appendix 1 12
A shareholder is someone that legally owns one or more share of stock in a company. The objective of the firm is to maximize shareholder value by increasing the value of the company’s stock. Although other potentials exist, such as survival, maximizing market share, maximizing profits and so on, these are co-insistent with maximizing shareholder value.
The responsibility of these objectives is held by Financial Managers. Financial Manger decisions can be divided into three general areas: investment decisions; financing decisions& dividend decisions. The investment principle determines where businesses invest their resources, the financing principle governs the mix of funding used to fund these investments, and the dividend principle answers the question of how much earnings should be reinvested back into the business and how much returned to the owners of the business. These decisions govern and guide everything that gets done and are interdependent with each other.
In practice corporate finance decision are not made solely by corporate financial management. Inside an integrated approach is taken by various directors. Directors that would be involved include finical directors, who oversee the finance function and will also consult with accountants, tax experts and legal counsel. Another director would be a corporate treasurer who keeps in contact with banks and other finical institutions regarding cash flow. Human resource directors help to dictate on ideal
“Financial Managers need only concentrate on meeting the needs of shareholders - no other group matters”
Discuss the above statement using practical examples to support you answer.
Contents Page
Introduction 1-2
Formulas: Profitability 2-3 Liquidity 4-5 Investment 5-6
Summary of Widgets Finical Ratios: Profitability 6-8 Liquidity 8-9 Investment 9-10
Conclusion 10
Bibliography 11
Appendix 1 12
A shareholder is someone that legally owns one or more share of stock in a company. The objective of the firm is to maximize shareholder value by increasing the value of the company’s stock. Although other potentials exist, such as survival, maximizing market share, maximizing profits and so on, these are co-insistent with maximizing shareholder value.
The responsibility of these objectives is held by Financial Managers. Financial Manger decisions can be divided into three general areas: investment decisions; financing decisions& dividend decisions. The investment principle determines where businesses invest their resources, the financing principle governs the mix of funding used to fund these investments, and the dividend principle answers the question of how much earnings should be reinvested back into the business and how much returned to the owners of the business. These decisions govern and guide everything that gets done and are interdependent with each other.
In practice corporate finance decision are not made solely by corporate financial management. Inside an integrated approach is taken by various directors. Directors that would be involved include finical directors, who oversee the finance function and will also consult with accountants, tax experts and legal counsel. Another director would be a corporate treasurer who keeps in contact with banks and other finical institutions regarding cash flow. Human resource directors help to dictate on ideal
Bibliography: • Lines, D., Marcouse, I., Martin, B., (2003). Complete A-Z Business Studies Handbook. 4th Edition. Hodder & Stoughton. • Watson, D., Head, Antony., 2000. Corporate Finance. Second Edition. Prentice Hall. • BookBoon., 2008. Corporate Finance. Available from http://www.BookBoon.co.uk. Ventus Publishing Aps • http://www. va-interactive.com /inbusiness /editorial /finance /ibt/ ratio_analysis.html • http://www.bized.co.uk/compfact/ratios/intro1.htm • http://tutor2u.net/business/accounts/main_ratios.htm • http://www.cadburylearningzone.co.uk/business_studies/16to19/finance/ratio_analysis.asp