- 10 Marks
FM – April 2022 – L2 – Q1a – Introduction to Financial Management
Discuss the consistency between shareholder value maximization and social responsibility, and explain why shareholder value maximization is preferred over profit maximization.
Question
Shareholder value maximisation is a core sustainable objective for shareholders than short-term profit maximisation. Also important to management is social responsibility to the community which is delivered at a great cost to the organisation.
Required:
i) Is shareholder value maximisation inconsistent with social responsibility? Explain. (4 marks)
ii) Explain why shareholders value maximisation is considered more appropriate than profit maximization. (3 marks)
iii) Explain THREE (3) non-financial objectives of an organisation. (3 marks)
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