Question

Statement 1: The objective of financial management is to maximize shareholders' wealth.
Statement 2: The shareholders gain if the value of shares in the market increases. Choose the correct option from the following:

• A. Statement I is true and Statement II is false.
• B. Statement II is true and Statement I is false.
• C. Both the Statements are true.
• D. Both the Statements are false.

Hint:

Financial decisions should be aimed at enhancing the firm's valuation and providing better returns to shareholders.

Answer 1

The Correct Option is C

Phase 1: Defining Financial Management Goals
The principal objective of financial management is to enhance shareholder equity by escalating the firm's market worth.
Phase 2: Assessing the Declarations
- Declaration I is accurate, as financial management prioritizes wealth enhancement via sound financial choices.
- Declaration II is also accurate; a rise in stock market price directly benefits shareholders by augmenting their investment's worth.
Resolution: The appropriate selection is (mathbf{(C)}), because both declarations precisely delineate financial management objectives.