# Introduction to financial management and company goals
This section introduces the fundamental concepts of financial management, explaining its importance for a company's health and profitability, and outlines the primary goal of a firm to maximize shareholder value.
### 1.1 The importance of financial management
Financial management is crucial for a company's overall health and profitability. It encompasses managing and monitoring the financial health of a business, which includes its profitability, liquidity, and financial structure (solvency). Effective financial management ensures that a company can meet its short-term obligations, fund its operations, and invest in long-term growth.
**Key aspects of financial health monitored through financial management:**
* **Profitability:** This refers to the company's ability to generate earnings.
* **General profitability:** Measured by net income on financial statements.
* **Operational profitability:** Assessed using metrics like the sales margin.
* **Sales Margin Formula:**$$ \\text{Sales Margin} = \\frac{\\text{Operating Profit}}{\\text{Sales}} \\times 100 $$ This calculates the profit generated for every dollar of sales.
> **Example:** Lotus Bakeries reported sales of 657.3 million dollars with an operational profit (EBIT) of 109.7 million dollars. $$ \\text{Sales Margin} = \\frac{109.7 \\text{ million dollars}}{657.3 \\text{ million dollars}} \\times 100 = 16.7% $$
* **Liquidity:** This measures a company's ability to meet its short-term obligations.
* **Direct liquidity:** Assessed through cash and current investments.
* **Current Ratio:** A frequently used liquidity measure.
* **Current Ratio Formula:**$$ \\text{Current Ratio} = \\frac{\\text{Current Assets}}{\\text{Current Liabilities}} $$ An international standard suggests a minimum current ratio of 1.
* **Solvency (Financial Structure):** This relates to the company's financial structure, examining where funding comes from.
* **Degree of Financial Independence (Equity Ratio):**
* **Equity Ratio Formula:**$$ \\text{Equity Ratio} = \\frac{\\text{Equity}}{\\text{Total Assets}} $$ For instance, with 300 units of equity and 700 units of debt, total assets are 1000 units. $$ \\text{Equity Ratio} = \\frac{300}{1000} = 30% $$
* **Debt-to-Equity Ratio:**
* **Debt-to-Equity Ratio Formula:**$$ \\text{Debt-to-Equity Ratio} = \\frac{\\text{Debt}}{\\text{Equity}} $$ Using the previous example: $$ \\text{Debt-to-Equity Ratio} = \\frac{700}{300} = 2.33 $$
* **Cash Flow:** Understanding the amount of cash available and its sources is vital.
* **Sources of Cash:** Can originate from the bank or the company's own operational processes.
### 1.2 Company types (US context)
Understanding different company types is fundamental to financial management, as legal structure impacts liability, taxation, and access to capital.
* **Sole Proprietorship:**
* Owned by a single person.
* **Advantages:** Easy to establish, control, and dissolve; flow-through taxation (avoids double taxation).
* **Disadvantages:** Unlimited personal liability for business obligations; personal assets are at risk.
* Funding is limited to the owner's resources or business profits.
* **Partnership:**
* Owned by more than one person.
* **Types:**
* **General Partnership:** All partners have unlimited liability.
* **Limited Partnership (LP):** Features at least one general partner with unlimited liability and other limited partners.
* **Advantages:** Access to more sources of funding and expertise.
* **Disadvantages:** Shared control; limited or no protection of personal assets for partners.
* **Corporation:**
* A legal entity, separate from its owners.
* **Advantages:** Limited liability for shareholders (liability is limited to their investment); personal assets are protected; greatest access to funding.
* **Disadvantages:** More difficult and expensive to establish; dilution of individual control.
* **C-Corporation (C-Corp):**
* The standard corporation structure in the US.
* **Double Taxation:** Profits are taxed at the corporate level and again when distributed to shareholders as dividends.
* This structure is often avoided by small businesses due to the double taxation.
* **S-Corporation (S-Corp):**
* A variation of a C-Corp that can elect to be taxed as an S-Corp with IRS approval.
* **Pass-Through Taxation:** Corporate income and losses are passed directly to shareholders and reported on their personal tax returns, avoiding corporate-level tax.
* **Requirements:** Typically limited to 100 shareholders, one class of stock, and shareholders must be US citizens or residents.
* **Limited Liability Company (LLC):**
* A legal entity providing personal liability protection.
* Not recognized as a separate tax-paying entity by the IRS; owners must choose one of the other structures (sole proprietorship, partnership, or corporation) for tax purposes.
### 1.3 Business structure
Business structure, particularly the organizational chart, defines the hierarchy and reporting lines within a company.
* **Line Authority:** Refers to direct authority over subordinates and responsibility for decision-making.
* **Span of Control:** The number of subordinates a manager directly supervises.
* **Unity of Leadership:** The principle that each employee should report to only one supervisor.
* **Staff Authority:** Supportive authority held by advisory or support personnel who do not have direct decision-making power (e.g., legal counsel).
**Common organizational structures:**
* **Line Organization:** A simple, hierarchical structure with direct lines of authority.
* **Line-Staff Organization:** Combines line authority with staff support for advisory and specialized functions.
* **Functional Organization:** Organizes departments based on specific business functions (e.g., marketing, finance, production).
* **Divisional Structure:** Organizes the company into divisions based on product, geographic region, or market/customer type.
* **Matrix Structure:** Features a double line of authority, often used for complex projects requiring coordination of specialists across departments.
* **Disadvantages:** Can lead to conflicts due to multiple reporting lines and potential ambiguity.
The financial function within a company is typically overseen by a Chief Financial Officer (CFO) and includes roles like:
* **Accounting:** Financial statement preparation and reporting.
* **Treasurer:** Manages cash and liquidity.
* **Controller:** Focuses on cost accounting and financial ratios.
* **Taxes:** Managing tax liabilities and compliance.
* **Risk Manager:** Identifying and mitigating financial risks.
* **Internal Auditor:** Ensuring compliance and internal controls.
* **External Auditor:** Independent verification of financial statements.
* **Compliance and Ethics Director:** Overseeing adherence to regulations and ethical standards.
**Fundamental decisions in financial management:**
* **Capital Budgeting:** Deciding on the acquisition of long-term assets to maximize net benefits.
* **Financing:** Determining the optimal mix of debt and equity to fund assets, directly impacting solvency.
* **Working Capital Management:** Managing short-term assets and liabilities to enhance cash flow, impacting liquidity.
### 1.4 Business reports
Various business reports provide insights into a company's performance and health.
* **Financial Statements (FS):** Offer a limited view of value creation and financial health.
* **Annual Report (AR):** A more comprehensive report detailing the company's financial performance and activities over a year.
* **Integrated Report (IR):** Extends beyond financial performance to include the company's impact on stakeholders and the environment.
* **Sustainability Report:** Focuses specifically on the company's environmental, social, and governance performance.
### 1.5 The goal of the firm
The primary objective of a firm is to maximize the value of its shares. This goal is superior to other potential objectives.
* **Why not only maximize market share?**
* Focusing solely on market share, particularly through low pricing, can lead to an inability to cover costs and sustain operations.
* **Why not only maximize profits?**
* **Accounting Profit vs. Economic Profit:** Accounting profit may not reflect true economic profit.
* **Profit vs. Cash Flow:** Profit earned on paper does not always equate to cash received. The time value of money means that cash received in the future is worth less than cash received today. Poor cash flow planning can lead to a profitable company being unable to pay its obligations.
> **Tip:** A business can show a profit on its financial statements but still face a cash shortage if sales are on credit and collections are slow, or if there are significant expenses due at specific times that are not adequately budgeted for. Managing cash flow diligently is paramount.
* **Maximizing the value of the firm’s shares:**
* This goal considers future cash flows, new product development, target markets, and the inherent risks of the business. Shareholder value maximization is a forward-looking and comprehensive objective.
While other goals like customer satisfaction, growth, and employee development are important, they are often best achieved when aligned with and supported by the overarching goal of maximizing shareholder value.
* * *
# Company types and business structures
This section delves into the various legal structures businesses can adopt, the different ways companies are organized internally, and the implications of these choices.
### 2.1 Company types (US)
Businesses can be structured in several ways, each with distinct characteristics regarding ownership, liability, and taxation.
#### 2.1.1 Sole proprietorship
* **Definition:** A business owned and operated by a single individual.
* **Examples:** Barbershops, butcher shops.
* **Advantages:**
* Easy to establish, control, and dissolve.
* Minimal formalities.
* Flow-through taxation: profits are taxed only on the owner's personal income tax return, avoiding double taxation.
* **Disadvantages:**
* Unlimited personal liability: the owner is personally responsible for all business obligations, placing personal assets at risk.
* Funding is limited to the owner's resources or business profits.
* **Taxation:** The business itself pays no corporate tax; income is reported on the owner's personal tax return.
* **Naming:** The business name is often the same as the owner's name. To operate under a different name, a "Doing Business As" (DBA) filing is typically required.
#### 2.1.2 Partnership
* **Definition:** A business owned by more than one person.
* **Types:**
* **General Partnership:** All partners have unlimited liability for the firm's obligations.
* **Limited Partnership (LP):** Includes at least one general partner with unlimited liability and one or more limited partners whose liability is limited to their investment.
* **Advantages:**
* Access to more sources of funding.
* Broader range of expertise due to multiple owners.
* **Disadvantages:**
* Shared control and decision-making.
* Limited or no protection of partners' personal assets (in a general partnership).
#### 2.1.3 Corporation
* **Definition:** A legal entity distinct from its owners, offering limited liability. Also known as a limited company (LC).
* **Liability:** Shareholders' liability is limited to their investment or commitment in the company. The corporation is responsible for its own obligations and actions.
* **Advantages:**
* Limited liability for shareholders, protecting personal assets.
* Greatest access to funding sources.
* **Disadvantages:**
* More complex and expensive to establish.
* Can dilute individual control over the firm.
##### 2.1.3.1 The C-Corporation (C-Corp)
* **Definition:** The standard corporate structure under IRS rules; commonly used by large, publicly traded companies.
* **Legal Status:** A separate legal entity, protecting shareholders' assets from creditor claims.
* **Taxation:** Subject to **double taxation**: profits are taxed first at the corporate level, and then again at the personal level when distributed as dividends to shareholders.
* **Suitability:** Many small businesses avoid C-corps due to the double taxation issue.
##### 2.1.3.2 The S-Corporation (S-Corp)
* **Definition:** A variation of the C-corp that allows for pass-through taxation. A C-corp can elect to become an S-corp with IRS approval.
* **Taxation:** Profits and losses are passed directly through to shareholders and reported on their personal tax returns at individual income tax rates. The S-corp itself does not pay corporate tax.
* **Requirements:**
* No more than 100 shareholders.
* Only one class of common stock (preferred stock is not allowed).
* Shareholders must be U.S. citizens or residents (corporations and partnerships cannot own shares).
##### 2.1.3.3 The Limited Liability Company (LLC)
* **Definition:** A legal entity (legal person) that is not recognized by the IRS as a separate taxpaying business structure.
* **Liability:** Provides personal liability protection to owners, similar to a corporation (as per state law).
* **Taxation:** Owners must choose one of the other tax structures (sole proprietorship, partnership, C-corp, or S-corp) for tax purposes.
#### 2.1.4 Choosing a company type
The most suitable company type depends on individual circumstances:
* **Sole proprietorship or General Partnership:** If minimal initial investment and low personal risk are priorities.
* **C-Corp:** Suitable for large companies with numerous investors and significant capital needs.
* **Sole Proprietorship:** Appropriate for solo entrepreneurs with limited initial investment and risk.
* **S-Corp:** Ideal if a limited company structure is desired, but income needs to pass through directly to owners' personal tax forms.
### 2.2 Business structure
Business structure refers to the way a company is organized internally, often visualized through an organizational chart. Key concepts include:
* **Line Authority:** Represents the direct chain of command and responsibility within an organization.
* **Span of Control:** The number of subordinates a manager can effectively supervise.
* **Unity of Leadership:** The principle that each employee should report to only one supervisor.
* **Staff Authority:** Relates to advisory or support functions, where individuals do not have direct decision-making power but provide expertise (e.g., legal counsel, HR).
#### 2.2.1 Organizational structures
Several models exist for structuring a business:
* **Line Organization (Hierarchical):** A clear, direct chain of command from top to bottom, with defined roles and responsibilities.
* **Characteristics:** Vertical structure, clearly defined roles, less employee autonomy.
* **Line-Staff Organization:** Combines the direct authority of line managers with the advisory and support functions of staff departments.
* **Functional Organization:** Groups employees by specialized functions or departments (e.g., marketing, finance, operations).
* **Divisional Structure:** Organizes the company around specific outputs or markets. There are three main types:
* **Product Structure:** Divisions based on different product lines.
* **Geographic Structure:** Divisions based on geographical regions.
* **Market or Consumer Structure:** Divisions based on specific customer segments.
* **Matrix Organization:** Combines elements of different structures, often with employees reporting to two or more managers (e.g., a functional manager and a project manager).
* **When Used:** For coordinating complex activities and efficiently allocating specialists across projects.
* **Disadvantages:** Can lead to ambiguity, power struggles, stress, and conflicts due to the breakdown of the unity of leadership.
#### 2.2.2 The Financial Function within a Business Structure
The financial function is critical and typically includes:
* **Chief Financial Officer (CFO):** Overall responsibility for financial management.
* **Accounting:** Manages financial statements, reporting, and record-keeping.
* **Treasurer:** Primarily responsible for managing the company's cash and funding.
* **Controller:** Oversees cost accounting, financial ratios, and internal controls.
* **Taxes:** Manages tax planning and compliance.
* **Risk Manager:** Identifies and mitigates financial risks.
* **Internal Auditor:** Reviews internal controls and financial processes.
* **External Auditor:** Provides an independent opinion on the financial statements.
* **Compliance and Ethics Director:** Ensures adherence to regulations and ethical standards.
**Fundamental Decisions in Financial Management:**
* **Capital Budgeting:** Determining which long-term assets to acquire to maximize net benefits.
* **Financing:** Deciding how to fund assets through an optimal mix of debt and equity, directly linking to solvency.
* **Working Capital Management:** Managing short-term assets and liabilities to promote cash flow growth, directly linking to liquidity.
> **Tip:** Poor decisions in capital budgeting, financing, or working capital management can lead to bankruptcy or business failure.
### 2.3 Business reports
Various reports provide insights into a company's performance and health.
* **Financial Statement (FS):** Offers a limited view of value and health creation.
* **Annual Report (AR):** A more comprehensive report detailing the company's performance over the year.
* **Integrated Report (IR):** Extends beyond financial performance to include the company's impact on various stakeholders and the environment.
* **Sustainability Report:** Specifically focuses on the company's environmental, social, and governance (ESG) performance.
### 2.4 The goal of the firm
The ultimate objective of a firm is not solely to maximize market share or short-term profits.
* **Why not only maximize market share (volume)?** Low prices to achieve high market share may lead to an inability to cover costs and sustain the business.
* **Why not only maximize profits (Revenue – Costs)?**
* **Accounting profit vs. Economic profit and cash:** Accounting profit may differ from economic profit and the actual cash generated.
* **Profit vs. Cash received:** Earning a profit does not guarantee immediate cash flow; the time value of money is a factor.
* **The primary goal is to maximize the value of the firm’s shares.** Shareholder value is a benchmark that considers:
* Future expected cash flows.
* Opportunities for new products and target markets.
* The risks associated with the business.
> **Example:** A business might show a significant accounting profit because it has made many sales on credit. However, if customers do not pay their invoices promptly, the business may not have enough actual cash on hand to pay its own bills (e.g., rent, salaries, suppliers), leading to a cash flow crisis despite being profitable on paper. This highlights the critical distinction between profit and cash flow.
* * *
# Financial analysis and reporting
Financial analysis and reporting are crucial for understanding and managing a company's financial health, profitability, and liquidity.
### 3.1 Understanding financial health
Financial management focuses on monitoring and ensuring the financial well-being of a company. This involves assessing three key areas: profitability, liquidity, and solvency.
#### 3.1.1 Profitability
Profitability refers to the company's ability to generate earnings.
* **General profitability:** This is measured by net income as reported in the financial statements.
* **Operational profitability:** This is assessed by metrics like the sales margin.
The **sales margin** is calculated as:
$$ \\text{Sales margin} = \\frac{\\text{Operating Profit}}{\\text{Sales}} \\times 100 $$
This metric indicates the profit generated for every euro (or other currency unit) of sales.
> **Example:** For the first half of 2025, Lotus Bakeries reported sales of 657.3 million dollars with an operational profit (EBIT) of 109.7 million dollars.
>
> Sales Margin = ($109.7 \\text{ million} / 657.3 \\text{ million}) \\times 100 = 16.7%
This means that for every dollar of sales, Lotus Bakeries generated 16.7 cents in operational profit.
3.1.2 Liquidity
Liquidity measures a company's ability to meet its short-term obligations.
- Direct liquidity: This is often assessed by looking at cash and current investments readily available in the financial statements.
- Current Ratio: This is a widely used liquidity metric.
The Current Ratio is calculated as:
An international standard suggests a minimum current ratio of 1.
Tip: While the current ratio is important, it's also crucial to consider the quality and salability of current assets when assessing liquidity.
3.1.3 Solvency (Financial structure)
Solvency relates to the company's financial structure and its ability to meet its long-term obligations. It answers the question of where the funding for the company comes from.
- Degree of financial independence: This ratio indicates the proportion of assets financed by equity.
The Degree of financial independence is calculated as:
Example: If a company has 300,000 dollars in equity and 700,000 dollars in debt, its total assets are 1,000,000 dollars.
Degree of financial independence = $300,000 / 1,000,000 = 0.30 \\text{ or } 30%$.
- Debt-to-equity ratio: This ratio shows the relationship between debt financing and equity financing.
The Debt-to-equity ratio is calculated as:
In the previous example:
Debt-to-equity ratio = $700,000 / 300,000 = 2.33$.
>
> #### 3.1.4 Cash Flow
>
> Understanding cash flow is vital because a business can show a profit on paper but still struggle to pay its obligations if cash is not managed effectively.
>
> * **Cash flow** refers to the real-time stream of money moving into and out of a business.
>
> * Sales recorded as revenue may not translate into immediate cash receipts, as payment terms can result in delays.
>
> * Poor cash flow planning is a leading cause of small business failure.
>
>
> > **Tip:** A business should prepare both a master budget and a cash flow budget to manage its payables effectively. This helps in anticipating larger, non-monthly payments like insurance premiums.
>
> ### 3.2 Types of business reports
>
> Various reports provide different perspectives on a company's performance and impact.
>
> * **The Financial Statement (FS):** Offers a limited view of value and health creation.
>
> * **The Annual Report (AR):** A more comprehensive document typically including financial statements and narrative information.
>
> * **The Integrated Report (IR):** A more holistic report that also considers the company's impact on stakeholders and the environment.
>
> * **The Sustainability Report:** Specifically focuses on the company's environmental, social, and governance (ESG) performance.
>
>
> * * *
>
> # Financial management functions and decisions
>
> Financial management encompasses the core responsibilities within a financial function and the fundamental decisions that drive business success.
>
> ### 4.1 The financial function and its roles
>
> The financial function within a company is critical for managing and monitoring its financial health. This involves ensuring profitability, maintaining adequate liquidity, and managing the financial structure (solvency). It also involves analyzing cash flow and assessing the return on investment (ROI) of projects and activities. Budgeting is a key tool used to achieve financial objectives.
>
> #### 4.1.1 Key roles within the financial function
>
> The financial function typically includes several key roles, each with specific responsibilities:
>
> * **Chief Financial Officer (CFO):** This individual is ultimately responsible for all aspects of the financial management of the company.
>
> * **Treasurer:** The treasurer's primary responsibility is the management of cash and cash equivalents.
>
> * **Controller:** The controller is responsible for cost accounting, financial reporting, and the calculation of financial ratios.
>
> * **Other roles:** Depending on the company's size and structure, other roles may include Tax Manager, Risk Manager, Internal Auditor, External Auditor, and Compliance and Ethics Director.
>
>
> ### 4.2 Fundamental financial decisions
>
> Effective financial management relies on making sound decisions in three core areas:
>
> #### 4.2.1 Capital budgeting
>
> Capital budgeting involves making decisions about which long-term assets the company should acquire. The objective is to select assets that will maximize the net benefits for the firm over their useful lives. These decisions have a significant impact on the company's future growth and profitability.
>
> #### 4.2.2 Financing decisions
>
> Financing decisions concern how the company will pay for its short-term and long-term assets. This involves finding the optimal combination of debt and equity financing to fund operations and investments. These decisions are directly linked to the company's solvency and its ability to meet its long-term obligations.
>
> #### 4.2.3 Working capital management
>
> Working capital management focuses on the efficient management of the company's short-term resources and obligations. This includes managing current assets (like inventory and accounts receivable) and current liabilities (like accounts payable) to promote healthy cash flow growth. This function is closely tied to the company's liquidity.
>
> > **Tip:** Poor decisions in any of these three fundamental areas—capital budgeting, financing, or working capital management—can lead to serious financial difficulties, including bankruptcy.
>
> ### 4.3 Impact on business success
>
> The effective execution of financial management functions and decisions is paramount to a business's overall success. It ensures that the company can meet its obligations, fund its growth, and ultimately maximize the value of its shares.
>
> #### 4.3.1 The goal of the firm
>
> While maximizing market share or short-term profits might seem appealing, the ultimate goal of financial management is to **maximize the value of the firm’s shares**. This goal considers not only current profitability but also future cash flows, the risks associated with the business, and the impact on all stakeholders.
>
> > **Example:** A company might achieve a high market share by selling products at a very low price. However, if this pricing strategy makes it impossible to cover costs and generate sufficient cash flow, the company will not be sustainable in the long run, and its share value will suffer. Similarly, accounting profits do not always translate into available cash, highlighting the importance of cash flow management.
>
> * * *
>
> ## Common mistakes to avoid
>
> * Review all topics thoroughly before exams
>
> * Pay attention to formulas and key definitions
>
> * Practice with examples provided in each section
>
> * Don't memorize without understanding the underlying concepts
>
| Term | Definition |
|------|------------|
| Financial Management | The practice of managing financial assets and liabilities to ensure the company's profitability, liquidity, and solvency, ultimately aiming to maximize shareholder value. |
| Profitability | A measure of a company's ability to generate earnings relative to its revenue, operating costs, or other expenses over a specific period. It indicates how well a company is performing financially. |
| Sales Margin | A profitability ratio that measures the percentage of revenue that remains after deducting all operating expenses, including cost of goods sold and overhead. It is calculated as Operating Profit / Sales. |
| Liquidity | A company's ability to meet its short-term financial obligations as they come due. It is often assessed by looking at a company's cash on hand and readily convertible assets. |
| Current Ratio | A liquidity ratio that compares a company's current assets to its current liabilities. A ratio of 1 or more generally indicates a healthy ability to cover short-term debts. It is calculated as Current Assets / Current Liabilities. |
| Solvency | A company's ability to meet its long-term financial obligations and debts. It reflects the overall financial health and stability of the business, often examined through its financial structure. |
| Financial Structure | The composition of a company's assets and liabilities, specifically how it is financed through a mix of debt and equity. It influences the company's risk and potential returns. |
| Sole Proprietorship | A business structure owned and run by one individual with no legal distinction between the owner and the business. The owner is personally liable for all business debts and obligations. |
| Partnership | A business structure where two or more individuals agree to share in the profits or losses of a business. Partners can have varying levels of liability depending on the partnership type. |
| Corporation | A legal entity that is separate and distinct from its owners, offering limited liability protection to shareholders. It can enter into contracts, own assets, and be sued. |
| C-Corp | A standard type of corporation that is taxed separately from its owners. Profits are taxed at the corporate level, and then again at the individual level when distributed as dividends, leading to potential double taxation. |
| S-Corp | A variation of a C-corp that allows profits and losses to be passed through directly to the owners' personal income without being subject to corporate tax rates. This avoids double taxation. |
| LLC (Limited Liability Company) | A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. It is a legal entity but not a taxpaying structure itself. |
| Organizational Chart | A diagram that visually represents the structure of an organization, showing the relationships between different positions, departments, and lines of authority. |
| Capital Budgeting | The process a company uses to evaluate potential major projects or investments. It involves assessing whether the long-term assets acquired will maximize net benefits for the firm. |
| Financing | The process of securing funds for a business. In financial management, it involves deciding how to pay for assets by determining the optimal mix of debt and equity financing. |
| Working Capital | The difference between a company's current assets and current liabilities. Managing working capital involves optimizing short-term resources and obligations to support business growth and cash flow. |
| Integrated Report (IR) | A comprehensive business report that communicates how an organization's strategy, governance, performance, and prospects, in the context of its external environment, lead to the creation of value over the short, medium, and long term. |
| Shareholder Value | The total return provided to a company's shareholders, including stock price appreciation and dividends. Maximizing shareholder value is often considered the primary goal of a firm. |