W998AMMT.1
1. What should be the goal of a financial manager and why? (4)
This question comes from lecture 1. The goal of a financial manager should be to maximize the wealth of the shareholders (maximize stock price, maximize market value of the assets). The shareholders are the owners of the firm and their capital is at risk. The financial manager is the caretaker of the shareholders’ money so his or her job is to maximize their wealth.
In order to receive full credit for your answer, you not only had to give the correct goal, but explain why following that goal is optimal. This involved tying that goal to the welfare of stockholders and pointing out that the stockholders are the owners of the firm.