The decisions that are consistent with the firm’s share price maximization

The decisions that are consistent with the firm’s share price maximization

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In every other firm today, its largest weaknesses and strengths depends on its focus on value maximization. One of the decisions that are consistent with the firms share maximization goals is choosing the correct objective. The main aim in decision making is mostly to increase, maximize and to improve the value of the organization. Another objective in decision making is to increase the wealth of the stockholder. When markets are seen to be efficient and the stock sold, the objective becomes to boost the price of the stock. The goals of the firms are mainly the ones that lead to maximizing the value of the firm. Stock price maximization is compatible with meeting the needs of the employees, in that they are mostly the stockholders in many organizations. This is mostly achieved by treating the employees well. Additionally, keeping the customers happy is another way of maximizing the stock price. The firm does not however become a social outlaw by maximizing price of stock. The stock prices are updated constantly and are observed easily because the financial theory focuses on stockholder wealth maximization. Decisions which are made are usually reflected in the stock prices because it is what determines if the investors were rational as it is believed that all the information is discounted in form of market price given by the share (Anderson, 2009).

Conclusively, Share price maximization can also be said to be a tool for managing the art of making decisions, to which their efficiency is evaluated through the ability of the given firm to achieve their goals. Being a similar decision, the intended goal of the prices is the increment of the stock of the firm. Few techniques used commonly to examine financial decisions have the ability to predict the impact of those decisions on the stock price directly. For instance, one of the criteria used to exercise judgment on decisions concerning the investments made are cash flow discounted and payback. The given measures tell the people concerned for example the managers if the decisions they made will have either positive or negative impacts within a number of years (Anderson, 2009).

References

Anderson, P. F. (2009). Marketing, strategic planning and the theory of the firm. The Journal of Marketing, 15-26.