1.

State with reasons, whether the following statements are True or False: The proper aim of financial management is wealth maximization.

Answer»

This statement is TRUE.

Reasons:

  • Financial management refers to management of funds and is mainly concerned with raising of finance and its effective utilization.
  • The shareholders invest their funds in a company or an organization with a motive to increase the investment. 
  • The wealth of such shareholders is reflected in market value of shares.
  • If the market value of equity shares increases, wealth of shareholders also increases.
  • The share price of a company, quoted in share market index, is a reflection of its earning capacity, dividend and retention policy.

Thus, the proper aim of financial management is maximizing market value of equity shares of the company.



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