Page 8 - DBP5043

TO MAXIMIZE SHAREHOLDER

WEALTH:

 The wealth of the owners is measured by the share

price of the stock, which in turn is based on the

timing of returns (cash flows and their risk.

 When considering each financial decision alternative

or possible action in terms of its effect on the share

price of the firm’s stock, financial managers should

accept only those actions that are expected to

increase share price.

 Because share price represents the owner’s wealth

in the firm, maximizing share price will maximize

owner wealth.