The appropriate goal for a financial manager in a corporation can be stated easily: to maximize the current value per share of the existing stock.
This goal encompasses several key aspects of financial management:
Profitability: The corporation must generate profits to increase shareholder value.
Growth: The corporation should invest in profitable opportunities that lead to long-term growth, ultimately enhancing shareholder wealth.
Efficiency: The financial manager must allocate resources efficiently to maximize returns and minimize costs.
Liquidity: The corporation should maintain sufficient liquidity to meet its obligations and capitalize on new opportunities.
Risk Management: The financial manager must identify, assess, and manage risks to protect shareholder value.
By focusing on maximizing the current value per share, the financial manager ensures that their decisions are aligned with the interests of shareholders, who are ultimately the owners of the corporation.
This goal avoids the ambiguity associated with other potential goals, such as maximizing profits or minimizing costs, and it provides a clear benchmark for evaluating the success of the financial manager.