What is the goal of enterprise financial management?

The financial management objectives of enterprises refer to the fundamental objectives that enterprises should achieve in financial management activities, which mainly include: 1. Maximizing the output value of enterprises; 2. Maximize enterprise profits; 3. Maximize shareholders' wealth; 4. Maximize enterprise value; 5. Maximize the interests of interested parties.

objectives of enterprise financial management

1. Maximizing profits

Enterprises aim at making profits, and the goal of maximizing profits is conducive to improving the overall economic benefits of enterprises.

Advantages:

① The profit index is simple to calculate and easy to understand.

② It is conducive to the rational allocation of enterprise resources and the improvement of the overall economic benefits of enterprises (strengthening management, improving technology, improving labor productivity and reducing product costs).

Disadvantages:

① Profit realization time and time value of money are not considered;

② The risks corresponding to realizing profits are not considered;

③ It does not reflect the relationship between the created profits and the invested capital;

④ It may lead to the tendency of short-term financial decision-making.

II. Maximizing shareholder wealth (core goal)

The owner of an enterprise is a shareholder, and the goal of maximizing shareholder wealth meets the requirements of the owner. For listed companies, shareholder wealth = share price × number of shares, and when the number of shares is fixed, shareholder wealth maximization pursues the maximum share price.

Advantages:

① Risk factors (reflected by discount rate) are considered;

② To some extent, it can avoid short-term behavior of enterprises (considering future cash flow);

③ For listed companies, the goal of maximizing shareholders' wealth is easy to quantify, which is convenient for assessment, rewards and punishments.

Disadvantages:

① It is usually only applicable to listed companies, and it is difficult for non-listed companies to apply it because it is difficult to determine the stock price;

② The stock price is influenced by many factors;

③ Maximizing shareholders' wealth emphasizes shareholders' interests, but not the interests of other stakeholders.

third, maximize enterprise value

in order to achieve the goal of maximizing enterprise value.

Enterprise value = market value of owner's equity+market value of creditor's equity = present value of enterprise's expected future cash flow

Advantages:

① The time of obtaining remuneration is considered and measured by the principle of time value;

② Considering the relationship between risk and reward;

③ Give priority to the long-term and stable development and sustained profitability of enterprises and overcome short-term behaviors;

④ replace price with value to avoid too much interference from external market factors.

Disadvantages:

① Too theoretical and difficult to operate;

② for non-listed companies, it is difficult to accurately determine the enterprise value.

IV. Maximizing earnings per share

Another way to maximize profits is to maximize earnings per share, compared with maximizing profits.

Advantages:

It reflects the relationship between the profit created and the invested capital.

Disadvantages:

It can't make up for other defects of the profit maximization goal.