1. Lecture 6
ORGANISATION OF FINANCE DEPARTMENT
Dr. Riya Singh
Assistant Professor
Kristu Jayanti College (Autonomous), Bengaluru
2.
3. PROFIT MAXIMIZATION AND WEALTH MAXIMIZATION
Effective procurement and efficient use of finance lead to proper
utilization of the finance by the business concern. It is the essential
part of the financial manager. Hence, the financial manager must
determine the basic objectives of the financial management.
Objectives of Financial Management may be broadly divided into two
parts such as:
1. Profit maximization
2. Wealth maximization.
4. Differences between Profit maximization &
Wealth maximization
Basis Wealth Maximization Profit Maximization
Definition
It is defined as managing financial
resources to increase the value of the
companyโs stakeholders.
It is defined as the management of
financial resources to increase the
companyโs profit.
Focus
Focuses on increasing the value of the
companyโs stakeholders in the long
term.
Focuses on increasing the profit of the
company in the short term.
Risk
It considers the risks and uncertainty
inherent in the companyโs business
model.
It does not consider the risks and
uncertainty inherent in the companyโs
business model.
Usage
It helps achieve a larger value of a
companyโs worth, which may reflect
in the companyโs increased market
share.
It helps achieve efficiency in the
companyโs day-to-day operations to
make the business profitable.
