The primary objective of Financial Management is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Shareholders’ wealth maximization
Option (1) Stakeholder’s profit maximization — Incorrect. Financial management works for the owners of the company, who are its shareholders, not for every stakeholder. Profit alone is also a weak aim, because it ignores risk and the time when the money comes in.
Option (2) Stakeholder’s capital maximization — Incorrect. No such objective exists. The aim is stated in terms of the shareholders’ wealth.
Option (3) Loss minimization — Incorrect. Avoiding losses is far too narrow. A firm can avoid a loss and still leave its owners no better off.
Option (4) Shareholders’ wealth maximization — Correct. The wealth maximisation concept says the primary aim of financial management is to make the shareholders as rich as possible. Their wealth is shown by the market price of the company’s shares. So every investment, financing and dividend decision is judged by whether it raises that price.
NCERT (2026-27 Edition): “Objectives 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 is linked to the three basic financial decisions which you will study a little later. This is because a company funds belong to the shareholders and the manner in which they are invested and the return earned by them determines their market value and price. It means maximisation of the market value of equity shares. …” |
Note: The same/similar question has been asked in different years by NTA as per the details given below:
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 29-05 S1 24-05 S1 11-05 S2 | 30-05 S1 15-05 S1 | – | 29-05 S3 | – |