Enterprise financial management objective theory and what are its advantages and disadvantages

Modern financial management theory, enterprise financial management goal theory includes profit maximization, shareholder wealth maximization, enterprise value maximization, maximize the interests of stakeholders. The corresponding advantages and disadvantages are as follows,

One of the advantages of profit maximization includes:

(1) Profit can be very specific and intuitive performance, which can directly reflect the amount of surplus products created by the enterprise.

(2) is conducive to the rational allocation of enterprise resources, and is conducive to the improvement of the overall economic efficiency of the enterprise.

The shortcomings of profit maximization include the following aspects,

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

(2) Considering only the amount of money and not considering the problem of risk.

(3) Considering only the total amount of profit and not reflecting the relationship between the profit created and the capital invested.

(4) It may lead to the tendency of short-term behavior and affect the long-term development of the enterprise.

II. The advantages of maximizing shareholders' wealth include:

(1) Considering the risk factor.

(2) It can avoid short-term behavior to a certain extent.

(3) For listed companies, the goal of maximizing shareholders' wealth is easier to quantify, and it is easy to assess, reward and punish.

The disadvantages of shareholder wealth maximization are

(1) There is no market value, which is difficult to be applied by non-listed companies.

(2) In practice, the share price is affected by many factors, and the share price can not completely and accurately reflect the financial management of the enterprise.

(3) It emphasizes more on the interests of shareholders and not enough on the interests of other stakeholders.

The advantages of maximizing enterprise value are,

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

(2) The relationship between risk and reward is considered.

(3) It overcomes the short-term behavior of firms in the pursuit of profits.

(4) Using value instead of price avoids the interference of too many external market factors and effectively circumvents short-term corporate behavior.

The disadvantage of enterprise value maximization is that it is too theoretical and not easy to operate; it is difficult to be applied by non-listed companies.

Four, the advantages of maximizing stakeholders' interests,

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

(2) reflects the value concept of cooperation *** win;

(3) this goal itself is a diversified, multi-level goal system, a better balance of the interests of the main body of each interest;

(4) embodies the the unity of foresight and reality.

The disadvantage of maximizing the interests of stakeholders is that it is difficult to operate, there are conflicts of interest, and it is difficult to take into account the interests of all parties.