Shareholder wealth maximation is defined as increasing the value of a business in order to increase the value of the shares held by stockholders (Bragg, 2018). The companys value is dependent upon the companys ability to create free cash flows. As a shareholder in a company I would want to maximize my wealth. I would analyze the financial history of a company and confirm the stock price has also increased over the years. The better a company is doing financially, the better my return should be.

There are many advantages of shareholder wealth maximization. One main advantage is increased returns. In other words, make as much money as possible for the business shareholders. Another advantage is maximizing wealth is an objective and unemotional business goal (Kokemuller, 2018). Lastly, it is a consistent goal. If the goal of the company is to maximize shareholder wealth, management will weigh both cost vs revenue-generation in all decision.

A disadvantage of maximizing shareholder wealth is that the CFO can become so focused cash flows at the expense of the employees and consumers. For instance, some companies downsize or outsource the workforce in order to save money. Another disadvantage is a company may cut production costs by using lower quality materials. While this can maximize profits and increase stock value in the beginning, as consumers complain the stock value will suffer. Lastly, in the pursuit of shareholder wealth maximization some companies may resort to falsifying financial records, making the company look good on paper.

Required

compare and contrast the above view on shareholder maximization with your own. Support your position by offering a counterpoint or resources from which your peer can derive additional knowledge.