Question

The main objective of financial management is:

• A. Profit maximisation
• B. Wealth maximisation
• C. Sales maximisation
• D. Cost minimisation

Hint:

Modern financial management is guided by wealth maximisation, not mere profit maximisation.

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
The question tests a core concept from the Nature/Principles of Management syllabus.

Step 2: Identifying the correct option:
Modern financial management theory holds Wealth Maximisation (maximising the market value of the firm's shares/shareholders' wealth) as the primary objective, since it accounts for the time value of money and risk — unlike profit maximisation, which ignores both.

Step 3: Why (A) Profit maximisation is incorrect:
This is the traditional/older objective, criticised for ignoring time value of money and risk — modern theory prefers wealth maximisation.

Step 3: Why (C) Sales maximisation is incorrect:
Sales maximisation is not the primary financial-management objective; it may be a marketing goal.

Step 3: Why (D) Cost minimisation is incorrect:
Cost minimisation is one operational concern, not the overarching objective of financial management.

Final Answer:
Wealth maximisation