What is the overriding purpose of value- based management?
A) Short- term maximisation of shareholder wealth
B) Long- term maximisation of profit
C) Long- term maximisation of shareholder wealth
D) Short- term maximization of wealth for all stakeholders

Question

Quizplus · Accepted Answer

The overriding purpose of value-based management is long-term maximization of shareholder wealth. This approach emphasizes on creating value for shareholders by ensuring that investments are made in projects that generate higher returns than the cost of capital. It involves aligning the management's interests with those of shareholders and ensuring that decisions are made in the best interests of the company and its shareholders in the long run. This approach differs from short-term maximization of shareholder wealth or wealth maximization for all stakeholders.

What Is the Overriding Purpose of Value- Based Management