Wealth maximization means the goal of the firm should be to maximize the market value of its equity shares which represents the value of the firm to its equity shareholders. Wealth maximization means maximizing the net present value of a course of action. That financial action which has a positive net present value creates wealth and therefore is desirable. It is consistent with the objective of maximizing owner's economic welfare. It implies the fundamental objective of a firm should be to maximize the market value to its shares. In corporation, a management team is elected to manage its activities. Management is supposed to operate in the best interests of the shareholders. Some have argued that the managers could work just enough to keep stockholders' at a "fair" or "reasonable" level and then devote the remainder of their efforts and resources to public service activities, to employee benefits of higher executive salaries. Similarly, the stockholders generally hold portfolio of many different stocks to reduce total risks and to optimize the return.
Capital required for a business can be classified under two categories: fixed capital and working capital. Long-term funds are required to create production facilities through purchase of fixed assets such as plant, machinery, land, building, furniture, etc. The capital which is used in this regard is fixed capital. Funds are also needed for short term purpose for the purchase of raw materials, payments to wages and other day to day expenses, etc. These funds are known as working capital. So this fund is used on current assets such are being constantly converted into cash. So it is also known as revolving or circulating capital.Tere are two conclusion of working capital Gross concept : In the broad sense, the term 'working capital' refers to the gross working capital and represents the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise. Net working capital concept : In a narrow sense,...
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