FINANCIAL MANAGEMENT

• Company's goals


  Maximize the wealth of owners
• Creating value for company

  Fundamental goal
• Manager


  • Make decisions that contribute to wealth generation by maximising the share price
• Pushing up share price is important
• A company's goal might be to maximise wealth while management might aim at satisfying
• Shareholders wealth


  Calculated by adding dividend yield and capital gain
• Shareholders wealth calculation


  • Share price 1 year ago: K0.20
  • Dividend paid: K0.10
  • Current share price: K2.42
• Calculating shareholders wealth


  1. Dividend yield = (dividend per share / market price per share) x 100

  2. Capital Gain = (Difference between current and previous market price / previous market price) x 100

  3. Shareholders wealth = Dividend yield + Capital Gain
• Shareholders wealth = 18% + 10% = 28%
• It is composed of the cost of debt and the cost of equity, weighted by the proportion of each in the company's capital structure.