Financial Management

Minimising costs can besides be bingle of the goals of slightly non-profit organisations. Other firms may choose to maximize market share, hoping that these whirl on lastly increment the total profits in the future. Unfortunately, these goals will non 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 honest. Ultimately, the owners will merely 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 concur 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 monetary value performance. In this manner, this incentive plan woul d have served shareholders affair in that the managers will do their best to increase the shareholders wealth. Unfortunately, stock options offers clear up gain and no downside to managers. As such, they may be attached 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 chair of the managers. This may or may not benefit the managers, depending on the direction of the market. The relationship amongst owne rs and managers is called an agency relation! ship. Such relationship exists when a principal engages an agentive role to re symbolize 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 furbish up proprietor is one and the same, the principalagent relationship...If you want to get a in effect(p) essay, order it on our website: BestEssayCheap.com

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