November 30, 2014
Financial Management Goals
In any corporation or organization, the goal of financial management is to maximize profits and minimize costs. It also must maintain positive trends and increases in revenue in order to be sustainable and continue growth. Another important goal of financial management is to be able to recognize risk factors to ensure shareholder investments are not compromised. Their goal is to appropriately track financial activity in order to calculate the most accurate financial statements, as well as, predict any future projected growth or decline.
Earnings are valued depending on which meaning one is referring to. For instance, earnings themselves are valued by deducting the total costs from the total income—which can determine improvement and wealth maximization or vice versa. However, according to the valuation approach, according to Block, Hirt & Danielsen (2009), “the ultimate measure of performance is not what the firm earns, but how the earnings are valued by the investor. In analyzing the firm, the investor will also consider the risk inherent in the firm’s operation, the time pattern over which the firm’s earnings increase or decrease, the quality and reliability of reported earnings, and many other factors”.
Shareholder wealth can be maximized by achieving the highest value possible for the firm (Block, Hirt & Danielsen, 2009). This can be accomplished by always having the shareholders interest held in high regard when considering investment. It is also important to have ethical investment practices to ensure