Financial Management

Minimising costs can also be bingle of the goals of close non-profit organisations. Other firms may choose to maximize market share, hoping that these stretch forth on lastly addition the total profits in the future. Unfortunately, these goals will not maximise shareholders wealth if they are not translated into increased market value of the owners equity. objet dart the managers should do their best in maximising the shareholders wealth, they should ensure that their demeanour is not un respectable. Ultimately, the owners will scarce benefit if the business is operated at heart the legal and ethical limits. The stock options give the managers the right to acquire the shares at an hold charge. If the firms financial performance is good, the shares should advise in value and the managers would have participated in its gains. This allows the monetary compensation to be tied to a firms share set performance. In this manner, this incentive plan would have served shareholders use up in that the managers will do their best to increase the shareholders wealth. Unfortunately, stock options offers top off gain and no downside to managers. As such, they may be accustomed to winning excessive risk in order to increase the share price, which will not in the best interest of the shareholders over the enormous run.

Moreover, the returns of the stock market may be influenced by immaterial factors which may be beyond the agree of the managers. This may or may not benefit the managers, depending on the direction of the market. The relationship amongst owners and managers is called an agency relationship. ! Such relationship exists when a principal engages an agentive role to re acquaint on his/ her behalf. Agency problem, also known as principal-agent problem, arises when a conflict of interest is present between owner (or principal) and manager (or agent) because of differing goals. Since the owner and manager for mend proprietor is one and the same, the principalagent relationship...If you want to get a serious essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay