What is the primary goal of financial management?

The primary goal of financial management is to maximize shareholder wealth. This focus is fundamental because shareholders are the owners of a corporation and their primary interest lies in the returns on their investments. When a company aims to increase its stock price or the overall value of the firm, it effectively aligns its operations, strategies, and financial decisions with the interests of the shareholders.

Maximizing shareholder wealth typically involves making investment decisions that yield the highest returns while managing risks appropriately. This principle drives financial managers to optimize resource allocation, ensure effective capital budgeting, and engage in strategies that enhance profitability and growth.

While aspects such as employee satisfaction, operational costs, and market share can influence the overall performance of a company, they serve as means to support the ultimate goal of increasing shareholder wealth. Employee satisfaction can lead to better productivity, but it must ultimately correlate to enhancing the financial performance of the company. Similarly, minimizing costs or seeking to expand market share are tactics that could contribute to wealth maximization but are not the primary goals themselves.