Week 1 The Goal of the Firm

The Goal of the Firm

The following is something that should be burned into your memory forever!

The basic financial goal of a business is to maximize the wealth of the owners (stockholders in the case of corporations).

Why do finance people say this is so? Consider this train of thought:

Most people would agree that the goal of the firm is to make lots of money for the owners. That is, to make them rich, or "wealthy." The question is, how do you measure "wealth?"

On the next page we will discuss how exactly we do that.