Final answer:
The primary financial goal of a corporation is shareholder wealth maximization, which means maximizing the value of the firm's stock by selling competitive priced products and observing laws. Investors expect a return in two forms: dividends or capital gains. Corporations have the duty to maximize profits for their shareholders.
Step-by-step explanation:
The primary financial goal of a corporation is shareholder wealth maximization, which involves maximizing the long-run value of the firm's stock and requires taking a long-run view of a firm's operations. To achieve their financial goals, firms must develop products that consumers want, produce the products efficiently, sell them at competitive prices, and observe laws relating to corporate behavior.
When firms issue stock, they provide investors with the opportunity to receive a return, which could be a dividend or a capital gain when they sell the stock for a higher price than it was purchased. This capital gain reflects the increase in the stock's value, rewarding the investor for their risk and providing the firm with capital for growth and expansion. Corporations are also required to act in the best interest of their shareholders and have a fiduciary duty to maximize profits, which could involve reinvesting earnings or paying dividends.