Discussion
Which of the following statements is correct about financial management?
A. The objective of financial management is profit maximisation.
B. The objective of financial management is wealth maximisation.
Answer: C
Both statements are taken as correct in the key. The traditional objective of financial management is profit maximisation, that is, making the organisation's earnings as large as possible. The modern objective, which is broader because it also considers risk, timing of returns and the owners' interest, is wealth maximisation (the maximising of the value of the firm). So the first and second statements are both given as correct by the body and neither is incorrect.
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