Objectives of Financial Management

The primary aim of financial management is to maximise the wealth of shareholders. Shareholders are interested in wealth maximisation which depends upon the market price of the shares. If the market price of the shares increases, there is appreciation in the shareholders’ wealth and vice versa. Thus the major goal of financial management is to maximise market price of equity shares of the company. This goal could be achieved by taking finacial decision which are desirable for the growth of the company. The finance manager in a company makes decisions for the shareholders. He must implement financial decision which will ultimately prove gainful from the point of view of shareholder. The shareholders gain if the value of shares increases in the market. However, this maximisation of the price of company’s equity shares should be in the long run.

Besides wealth maximisation, the other objectives of financial management are as follows:

(i) To procure sufficient funds for the business.

(ii) To ensure effective utilisation of funds.

(iii) To ensure safety of funds.

(iv) To attain optimum capital structure.

(v) To ensure adequate return to the shareholders.