Financial Management

Minimising costs can also be bingle of the goals of about non-profit organisations.
Other firms may choose to maximize market share, hoping that these pass on
lastly increase the total profits in the future. Unfortunately, these goals will
not maximise shareholders wealth if they are not translated into increased
market value of the owners equity.
objet dart the managers should do their best in maximising the shareholders wealth,
they should ensure that their demeanour is not unethical. Ultimately, the owners
will only benefit if the business is operated at heart the legal and ethical limits.

The stock options give the managers the right to acquire the shares at an agreed
charge. If the firms financial performance is good, the shares should advise in
value and the managers would have participated in its gains. This allows the
monetary compensation to be tied to a firms share price performance. In this
manner, this incentive plan would have served shareholders interest in that the
managers will do their best to increase the shareholders wealth.
Unfortunately, stock options offers top gain and no downside to managers. As
such, they may be prone to winning excessive risk in order to increase the share
price, which will not in the best interest of the shareholders over the enormous run.




Moreover, the returns of the stock market may be influenced by immaterial factors
which may be beyond the control of the managers. This may or may not benefit
the managers, depending on the direction of the market.

The relationship amongst owners and managers is called an agency relationship.
Such relationship exists when a principal engages an agentive role to represent on his/
her behalf. Agency problem, also known as principal-agent problem, arises when
a conflict of interest is present between owner (or principal) and manager (or
agent) because of differing goals.
Since the owner and manager for sole proprietor is one and the same, the principalagent relationship...If you want to get a full essay, order it on our website: Orderessay



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