Financial Management is carried out with the primary aim of reducing the cost of the funds that are procured .....
what it means ???
Dear Student,
As cost of raising funds from various sources is different and finance managers always prefer the source with minimum cost because the main aim is ti reduce cost as much as can but keeping effecient and effectively as the main aim of Financial Management for a company is to opt for those financial decisions that prove gainful from the point of view of the shareholders. The share holders are said to gain when the market value of their shares rise. The market value of shares increase when the benefits from a financial decision exceed the cost involved in taking them. In other words, a financial decision raises the market value of share if it results in some value addition. Thus, financial decisions should be taken such that some value addition takes place and ultimately the price of the equity share increases. When a financial decision is able to fulfil the primary objective of wealth maximisation, other objectives such as proper utilisation of funds, maintenance of liquidity etc. are automatically fulfilled.
Regards
As cost of raising funds from various sources is different and finance managers always prefer the source with minimum cost because the main aim is ti reduce cost as much as can but keeping effecient and effectively as the main aim of Financial Management for a company is to opt for those financial decisions that prove gainful from the point of view of the shareholders. The share holders are said to gain when the market value of their shares rise. The market value of shares increase when the benefits from a financial decision exceed the cost involved in taking them. In other words, a financial decision raises the market value of share if it results in some value addition. Thus, financial decisions should be taken such that some value addition takes place and ultimately the price of the equity share increases. When a financial decision is able to fulfil the primary objective of wealth maximisation, other objectives such as proper utilisation of funds, maintenance of liquidity etc. are automatically fulfilled.
Regards