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MANAGEMENT
THEORY &
PRACTICE
AN OVERVIEW OF
FINANCIAL
MANAGEMENT AND THE
FINANCIAL
ENVIRONMENT
CHAPTER 1 OUTLINE
Primary Objective?
The primary objective should be
shareholder wealth maximization,
which translates to maximizing the
fundamental share price, not just the
current market price.
Should firms behave ethically? YES!
Business ethics are a companys
attitude and conduct toward its
employees, customers, community, and
shareholders.
Copyright 2014 by Nelson Education Ltd. 1-13
Stock Price Maximization and
Social Welfare
Do firms have any responsibilities to
society at large? Yes!
Unethical behaviour destroys public
trust and confidence.
Maximizing share price is good for
society. Why?
Shareholders are also members of
society.
Copyright 2014 by Nelson Education Ltd. 1-14
Is Maximizing Stock Price
Good for Consumers?
To maximize stock price, corporations
have to produce and deliver high-
quality goods and services at the
lowest possible cost to consumers.
Consumers can improve quality of
life by the direct or the indirect
investments in the stock market.
Mutual funds
Money market funds (MMFs)
Exchanged traded funds (ETFs)
Pension funds
Hedge funds
Private equity funds