What are the four main objectives and advantages and disadvantages of financial management?

The four objectives of financial management are profit maximization, shareholder wealth maximization, enterprise value maximization, and stakeholder wealth maximization.

I. Profit Maximization

1. Advantages

(1) Profit can directly reflect the size of the surplus product created by the enterprise;

(2) in the free competition of the capital market, the right to use the capital ultimately belongs to the enterprise that makes the most profit;

(3) only if each enterprise maximizes the creation of profit, the wealth of the whole society can be maximized. can be maximized, thus bringing about social progress and development.

(4) It is conducive to the rational allocation of enterprise resources and the improvement of the overall economic efficiency of enterprises.

2. Disadvantages

(1) It does not take into account the time of profit realization and the time value of money;

(2) It does not take into account the issue of risk;

(3) It does not reflect the relationship between the profit created and the capital invested;

(4) It may lead to the tendency of short-term financial decision-making, which will affect the long-term development of the enterprise.

II. Maximization of Shareholders' Wealth

1. Advantages ?

(1) Considering the risk factor (the stock price reacts more sensitively to the risk);

(2) To a certain extent, it can avoid the pursuit of short-term behavior of the enterprise;

(3) For listed companies, the goal of maximizing shareholders' wealth is easier to quantify, and it is convenient for assessment, reward and punishment.

2. Disadvantages ?

(1) It is difficult to be applied by non-listed companies;

(2) The share price is affected by many factors, and the share price can not completely and accurately reflect the enterprise's financial management status;

(3) It emphasizes more on the interests of shareholders, and does not pay enough attention to the interests of other related parties.

3. Maximization of enterprise value

1. Advantages

(1) It takes into account the time of obtaining compensation and measures it with the principle of time value;

(2) It takes into account the relationship between risk and compensation;

(3) It puts the enterprise's long term, stable development and sustainable profitability in the first place, and it can overcome the short-term behaviors of enterprises in pursuing profits;

(4) It emphasizes the interests of shareholders, while paying insufficient attention to the interests of other related parties.

(4) using value instead of price, overcoming too much interference from external market factors, effectively avoiding the short-term behavior of enterprises.

2. Disadvantages ?

(1) The value of an enterprise is too theoretical and not easy to operate;

(2) For unlisted companies, only a specialized assessment of the enterprise can determine its value. And when assessing the assets of an enterprise, it is difficult to be objective and accurate due to the influence of assessment standards and assessment methods.

IV. Maximizing the Interests of Stakeholders

1. Advantages?

(1) It is conducive to the long-term stable development of the enterprise;

(2) It embodies the value concept of cooperation***win and is conducive to the realization of the unity of the enterprise's economic benefits and social benefits;

(3) This goal itself is a diversified, multi-level goal system, which better takes into account the interests of the main body of interests;

(4) It embodies the forward-looking and realistic unity

2. Disadvantages

(1) The height of the stock price can only come from the capital market. Therefore, this viewpoint is only suitable for listed companies

(2) Even for listed companies, since the change of share price is not the only reflection of the company's performance, but the result of a combination of factors, therefore, the height of the share price sometimes can't fully reflect the height of the shareholders' finances

(3) It may lead to the contradiction and conflict between the owners and other interests.

Expanded Information:

Financial Management Objectives Influencing Factors

Enterprise Financial management objectives in different periods, different financial environment, different countries and other factors, summarized these objectives are affected by the following **** the same factors.

One, the main body of financial management

The main body of financial management refers to the enterprise's financial management activities should be limited to a certain organization, a clear spatial scope of financial management. Due to the establishment of independent financial management, so that the financial management activities become a specific embodiment of the overall objectives of the enterprise, which correctly establishes the theoretical basis for the enterprise financial management objectives.

Second, the financial management environment

The financial management environment includes the economic environment, legal environment, social and cultural environment and other financial management of the macro-environment, as well as the type of enterprise, the market environment, the procurement environment, the production environment, such as the micro-environment of the financial management, the same is also one of the main factors affecting the financial management objectives.

Third, enterprise interest group interests

Enterprise interest group refers to the group of interest relations with the enterprise. Under the modern enterprise system, the interests of the enterprise group is not simply the owners of the enterprise, affecting the financial management objectives of the interest groups, including enterprise owners, enterprise creditors, the government and the enterprise employees, etc., can not be attributed to a group of enterprise financial management objectives, but should be a comprehensive embodiment of the interests of the interest groups.

Four, social responsibility

Social responsibility refers to the enterprise in the production and operation activities, to obtain normal returns at the same time, should bear the corresponding social responsibility. Corporate financial management objectives and social responsibility objectively contradictory: corporate social responsibility will cause a reduction in profits and shareholders' wealth; corporate financial management objectives and social responsibility also have consistency.

First of all, enterprises bear social responsibility is mostly stipulated by law, such as the elimination of environmental pollution, the protection of consumer rights and interests, etc., the completion of the enterprise financial management objectives must be based on the premise of social responsibility. Secondly, enterprises actively undertake social responsibility, make more contributions to society, is conducive to the enterprise to establish a good image, but also conducive to the realization of the enterprise financial management objectives.

Reference:

Financial Management Objectives-Baidu Encyclopedia