Tweet

Financial Goals of Organization

Written by: Rahul Jain

Article Overview: The two important financial goals of organization can be profit maximization and wealth maximization.

Financial Goals of Organization

The two important financial goals of organization can be profit maximization and wealth maximization. Out of this wealth maximization is most important because it is based on cash flows of the organizations. On the other profit maximization can be vague as there can be multiple interpretations of profits. Moreover profits do not take care of time value of money and ignore risk attached to the returns. Also profit maximization focus on short term profitability which may not lead to long term wealth creation. Hence financial management is concerned with value maximization. Management's efforts are for increasing the value of the company for the shareholders. This requires investing in projects that are likely to provide positive returns to the company. Hence wealth maximization accounts for the timing and risk of the expected benefits.

Earnings are valued by deducting the total costs from total income. Hence Net Earnings = Total Income - Total costs. Cash flows will only take cash inflows and cash outflows. Increase in cash flows can lead to improvement in wealth maximization. Management decisions affect the stockholder wealth greatly. They can affect the wealth by following decisions:

• Present and future earnings per share

• Investment decision: This is related to deciding about the composition of fixed assets

• Financing decision: This is deciding about the mix of sources of funds

• Working capital managements

• Profit allocation decisions

We must understand that the firms' primary objective is maximizing the welfare of owners, but, in operational terms, they focus on the satisfaction of its customers through the production of goods and services needed by them. Firms state their vision, mission and values in broad terms. Wealth maximization is more appropriately a decision criterion, rather than an objective or a goal.

Related Articles
  The Power of the Pack
  Do you know your organization’s “Execution Quotient”?
  Build Personal Wealth Through Financial Goals
  Eight Steps to Goal Setting
  Effectiveness of Managing Change

Article Tags: allocation decisions, cash flows, cash inflows, decision criterion, earnings per share, financial goals, fixed assets, investment decision, management decisions, operational terms, profit maximization, sources of funds, stockholder wealth, term profitability, time value of money, value maximization, value of money, vision mission, wealth creation, wealth maximization



Related Forum Posts
Young Entrepreneur Organization - All You Need To Know - The Young Entrepreneur Organization (YEO) is a global community of entrepreneurs. This non-profit organization aims to make its members successful in their business through networking and training programs. This article tells you all you need to know about the Young Entrepreneur Organization, and the opportunities it makes available to young entrepreneurs from across the world. Young Entrepreneur Organization: Facts. 1) The Young Entrepreneur Organization has 5,000 members in 35 countries across the world. 2) The organization was founded in 1987. Since then, it has helped many aspiring entrepreneurs with training facilities and getting in touch with the right people. 3) The average age of the members of Young Entrepreneur Organization is 34 years. 4) In order to be eligible for the membership of Young Entrepreneur Organization, you need to be under the age of 40; and be the founder or partner in a business that has annual sales of more than $1 million. World Entrepreneurs Organization: A part of the Young Entrepreneur Organization, the World Entrepreneur Organization and takes the message of Young Entrepreneur Organization to many additional places around the world. This organization is especially active in the area of education and training for entrepreneurs. Young Entrepreneur Organization: Objectives. 1) To foster entrepreneurship. 2) To support Young Entrepreneur Organization members by providing them the chance to network and grow. 3) To provide resources to its members so that they can benefit the economy through innovative business ideas. 4) According to Young Entrepreneur Organization, you get to share your story with those who have had similar experiences, and thus gain insight into the best principles of entrepreneurship. Young Entrepreneur Organization: Facilities. At the Young Entrepreneur Organization, you get to meet and share views with like-minded people and fellow entrepreneurs. In order to facilitate a free exchange of ideas and growth for its member, the Young Entrepreneur Organization provides the following facilities to members. 1) Forum: Join the forum of the Young Entrepreneur Organization and start networking with entrepreneurs from across the world. Each forum group has 12 members who come together regularly to share their experiences and discuss issues related to entrepreneurship. 2) Mentor: In conjunction with the World Presidents’ Organization, the Young Entrepreneur Organization guides and counsels young entrepreneurs through a mentor program by the best business leaders. 3) Social Innovation: The Social Innovators Program involves Young Entrepreneur Organization member who wish to do something for about social issues. It helps members become socially aware citizens and gives them the opportunity to do something for their community. 4) Marketplace: The marketplace allows members to post business offers and receive replies from other members. These are just some of the facilities you will get if you become part of the Young Entrepreneur Organization. Others, like meeting prospective clients through trade shows, and special tools to network and meet with the right people are also part of the YEO facilities.
Protect yourself from Hackers - I received this from a newsletter from FXpro that I subscribed to. Please read and apply In the 21st Century internet is widely used for everyday job. Despite the "ease" and free time offered from internet use, one should be aware of the dangers and be prepared to avoid and safeguard him/herself from any attacks his/her computer may accept or even from the "unwanted" e-mails received. Golden Rules of Protection When using the internet make sure you have an antivirus program installed in order to avoid intrusions in your Computer, If you are using wireless internet connection make sure you have your connection locked, Do not save any official documents on your Computer, such as Copy of Passport, ID, Bank account numbers, copy of cards in case your Computer is hacked or even stolen, Keep all access codes/passwords in a safe place, Do not share an e-mail address with any person, Do not reveal any access codes, passwords to any person, If you are using a public Computer, ie in an internet cafe, make sure you log out any internet sites you have visited before leaving and deleting the cookies in order to minimize the risk of someone following your tracks, Regularly change your passwords on your e-mail accounts, or any other account that requires passwords, Be careful of e-mails received. Always check the e-mail address and in case you believe that this does not come from a person, Company, Organization you might be dealing with always send an e-mail to an e-mail address stated on the person's business card, Company's, Organization website requesting them to confirm that the e-mail address on the e-mail received belongs to them, before you reveal any information, Always have in mind that an established Company/Organization never uses an e-mail address such as g-mail, yahoo, hotmail etc thus always be careful when you are receiving such e-mails, even if it appears to be from a Company/Organization you are dealing with, Always remember that a Company or Organization will never require you to send them your login/password/access codes, When using a website that requires an access code, do not allow the browser to remember your passwords
Coming up with a business name - I've always been curious about how people select their business names and would love to hear how you came up with yours. When I first started my company I was selecting between Evan Carmichael & Associates or the Carmichael Organization. The reason was I had read two books by Anthony Robbins and Donald Trump and learned about how they came up with their companies names to make them look bigger than they were when they were first getting started. Robbins chose Anthony Robbins & Associates while Trump chose the Trump Organization. I settled on Evan Carmichael & Associates and later changed it to Evan Carmichael Communications Group when I incorporated on the advice of my lawyer. I agree that it is not the most innovative name out there but my business is about building a brand. I would love to hear how you came up with your company name!
Marketing and PR ideas related to a Credit Organization - Hello Everybody! I would be very grateful if you suggested some PR and Marketing ideas for a Credit Organization which target market is poor public who live in village and haven't any access to the internet. Thanx in advance
Future Financial Corporation - I've never heard of Future Financial Corporation is this a new company?


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

What is Discretionary Cash Flow

The True Cost of Employee Turnover

Are You An Accidental Consultant?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.