Q. What do you mean by Wealth Maximization?
This is also known as value maximization or net present worth maximization approach, it takes into consideration the time value of money. Its operational features satisfy all the three requirements of a suitable operational objective of financial courses of action i.e. quality of benefits, timing of benefits and exactness.
The wealth maximization approach can be more explicitly defined in the following ways:
The object (e of wealth maximization helps to resolve two most troublesome problems attached. with the flow of benefits. There is consideration of time value of money. The problem is handled by selecting an appropriate rate of discount and using this rate of discount the expected flow of future benefits.
The wealth maximization objective is consistent with the objective of maximizing the owner's economic welfare. The wealth maximization principle implies that the fundamental objective of affirm should be to maximize the market value of its shares.