Financial management aims at choosing the best investment and financing alternatives by focusing on their costs and benefits. Its objective is to:

Increase the shareholders' wealth

The correct answer is Option (1) → Increase the shareholders' wealth.

Financial Management is concerned with optimal procurement as well as usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. The primary aim of financial management is to maximise shareholders’ wealth which is referred to as the wealth maximisation concept. The market price of a company’s shares are linked to the three basic financial decisions.

Financial management aims at choosing the best investment and financing alternatives by focusing on their costs and benefits. Its objective is to increase the shareholders’ wealth. Financial planning on the other hand aims at smooth operations by focusing on fund requirements and their availability in the light of financial decisions.