Ans to the q no (05)

The shareholder wealth maximization goal states that management should seek to maximize the
present value of the expected future returns to the owners (that is, shareholders) of the firm. In
addition, the greater the risk associated with receiving a future benefit, the lower the value
investors place on that benefit. When business managers try to maximize the wealth of their firm,
they are actually trying to increase the company's stock price. As the stock price increases, the
value of the firm increases, as well as the shareholders' wealth.
The Managers of the Firm
People often think that the managers of a firm are the owners. In the case of a small business or
partnership, that might be true, such as sole proprietor owner who is also the manager. In a larger
business, there may be many levels of management and staff, and they do not necessarily own
the firm. Aside from their salaries and benefits, they only profit from the business if they own
shares of stock in the company.
When employees are also shareholders, they tend to have a greater sense of responsibility to the
firm. Consequently, many companies encourage employees to become shareholders. In fact,
some businesses offer shares of stock to their employees at a discount through an Employee
Stock Purchase Plan (ESPP