ACC 333 Lecture : maximize

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14 Jan 2013
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The answer lies in the different approaches to valuing a business. This method of valuation is most relevant to the financial objectives of a business. When shares are traded on a recognised stock market, such as the stock exchange, the market value of a business can be measured by the share price. When shares are held in a private company, and are not traded on any stock market, there is no easy way to measure value. Nevertheless, the objective remains for management to maximise the wealth of their ordinary shareholders. The wealth of shareholders in a company comes from: dividends received, market value of the shares. A shareholders" return on investment is obtained from: dividends received, capital gains from increases in the market value of his or her shares. If shares in a business are traded on a stock market, the wealth of shareholders is increased when the share price goes up.

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