The long-run objective of financial management is to:
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A. B. C. D.B
The long-run objective of financial management is to maximize the value of the firm, which means increasing the wealth of the owners or shareholders over time. Therefore, option B - Maximize the value of the firm's common stock is the correct answer.
Maximizing earnings per share (Option A) may not necessarily lead to an increase in the value of the firm since it does not take into account the cost of generating those earnings or the risk associated with the firm's activities. Furthermore, earnings per share can be artificially manipulated by accounting practices, such as share buybacks or issuing new shares, which may not reflect the true value of the firm.
Maximizing return on investment (Option C) is also an important objective of financial management, but it is a short-term goal that focuses on the profitability of individual projects or investments. While generating a high return on investment is crucial, it should not be pursued at the expense of the long-term value of the firm.
Maximizing market share (Option D) is a marketing objective, rather than a financial one. While having a large market share can be advantageous, it does not necessarily lead to an increase in the value of the firm if it comes at the expense of profitability or if it is not sustainable in the long run.
Therefore, the long-run objective of financial management is to make decisions that increase the value of the firm over time, taking into account the cost of capital, risk, and other factors that affect the firm's financial performance. This requires a balanced approach that considers both short-term and long-term goals, as well as the interests of all stakeholders, including shareholders, employees, customers, and the broader community.