Week 01 - Conflict between shareholder wealth maximization and profit maximization

In the first week of lectures, I was able to understand what is corporate financial management, it is the way of managing a company's finances effectively and efficiently in order to achieve the organisation's goals and objectives. For further understanding of this topic I referred the website Investopedia.com where an article reviewed by Will Kenton, 2019 states the corporate financing involves Financing Divisions, investment Decisions and Dividend Decisions.  Link: 
https://www.investopedia.com/terms/c/corporatefinance.asp
The primary concern of corporate finance is to increase the shareholder value by long and short term financial planning and also by implementing different strategies. Other common corporate concerns when it comes to corporate finance are, Revenue/Sales Maximization, Profit Maximization, Survival, Market Share Dominance and Social Responsibility. However attention must also be given to the boundaries, looking through the Anglo American lens companies focus on boundaries such as the company owned by the shareholders, liability of shareholders for companies actions is restricted to the value of shareholders investment, shareholders have a say in a companies management, can appoint and remove directors, must be consulted before important decisions are to be made, can sell or pass their ownership. 
https://www.youtube.com/watch?v=LmO_he3EXbY
Furthermore referring to this video i was able to understand goals of financial management - profit maximization vs wealth maximization.
The below image explains the conflicts of profit maximization and wealth maximization.

Image result for profit maximization and wealth maximization
After considering the boundaries the ultimate concern for corporate finance will be maximizing shareholder wealth from an Anglo American Perspective. This is also known as Shareholder Primacy Norm SPN. Wealth maximization is known as increasing the value of a company in order to increase the value of the shares held by shareholders. The main difference between profit maximization and wealth maximization is that profit maximization focuses on short term earnings, while the wealth maximization focus is on increasing the overall value of the business entity over time. Responsibility in Corporate Financing is where the Financial Managers achieve corporate financial sustainability where practices and systems are put in places to protect the organization from reckless financial decisions.   


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