2023年ACCAP4AFM笔记整理资料.docx

复习F9 ADDIN CNKISM.UserStyleFM旳目旳 Profit maximisation is often assumed, incorrectly, to be the main objective of a business. Reasons why profit is not a sufficient objective Investors care about the future Investors care about the dividend Investors care about financing plans Investors care about risk management For a profit-making company, a better objective is the maximisation of shareholder wealth; this can be measured as total shareholder return (dividend yield + capital gain). Maximization ofshareholder wealthInvestmentdecisionFinancingdecisionDividend Maximization of shareholder wealth Investment decision Financing decision Dividend decision Risk management Investment decisions (in projects or takeovers or working capital) need to be analysed to ensure that they are beneficial to the investor. Investments can help a firm maintain strong future cash flows by the achievement of key corporate objectives eg market share, quality. Financing decisions mainly focus on how much debt a firm is planning to use. The level of gearing that is appropriate for a business depends on a number of practical issues: Practical issues Explanation Life cycle A new, growing business will find it difficult to forecast cash flows with any certainty so high levels of gearing are unwise. Operating gearing If fixed costs are a high proportion of total costs then cash flows will be volatile; so high gearing is not sensible. Stability of revenue If operating in a highly dynamic business environment then high gearing is not sensible. Security If unable to offer security then debt will be difficult and expensive to obtain. Risk management decisions mainly involve management of exchange rate and interest rate risk and project management issues: these are covered in later chapters. The dividend decision is related to how much a firm has decided to spend on investments (the investment decision) and how much of the finance needed for this it has decided to raise externally (the finance decision) a