What are the main objectives of financial management? Briefly explain.
Or
State the primary objective of financial management.
The objective of financial management is to maximise the wealth of the owners of the business to the maximum extent.
According to this approach, owners’ interest can be best served by wealth maximisation. Wealth maximisation means to increase the capital invested in the business by the shareholders. Market price of the shares is the index of the capital invested. If the market price of the shares increases, it can be said that capital (wealth) invested by the shareholders has been appreciating. On the contrary, fall in the market price of the shares has an adverse effect on their wealth. Wealth of the shareholders can be computed by the following formula:
Shareholder’s Current Wealth in a Company = Number of Shares x Market Price Per Share.