Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Financial Management

Question:
Wealth maximization of shareholders depends on?
Options:
market price per share.
market price of finished good.
market price of inventory.
market price of fixed assets.
Correct Answer:
market price per share.
Explanation:
The primary aim of financial management is to maximise shareholders’ wealth, which is referred to as the wealth-maximisation concept. It means maximisation of the market value of equity shares. The market price of equity share increases, if the benefit from a decision exceeds the cost involved. All financial decisions aim at ensuring that each decision is efficient and adds some value. Such value additions tend to increase the market price of shares. Therefore, those financial decisions are taken which will ultimately prove gainful from the point of view of the shareholders.