Question

Need help on the questions below, please?:(

1-State the generally accepted financial goal of the firm, and indicate whether there is (are) competing goals that are as good or better.

2-Do we know when a firm has reached the goal of the firm? Why or why not?

Answer 1

1-State the generally accepted financial goal of the firm, and indicate whether there is (are) competing goals that are as good or better.

The generally accepted financial goal of the firm is "maximization of shareholders' wealth".

There are no other competing goals that are as good or better, though goals like maximizing other measures like market share, sales, Net income, EPS, etc are also talked of. All such other measures are inbuilt in the goal "maximization of shareholders' wealth", which is why it is the most appropriate goal of financial management.

2-Do we know when a firm has reached the goal of the firm? Why or why not?

Share price of a firm reflects the evaluation, by the market, of the financial decisions and performance of the firm. Increase in share price indicates increase in shareholders' wealth. Any decision is acceptable if it increases share price or at least maintains it.