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"Education is the most powerful weapon which you can use to change the world”
– Nelson Mandela

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Financial Analysis_Maximizing Shareholder Value Essay

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Q Maximizing Shareholder Value Essay (25 points) The number one reason for a corporation to exist is to maximize shareholder value. In a minimum 600-word essay, explain this concept. Explain what determines value for a shareholder. Identify short-term versus long-term result and balancing the interest of the shareholders versus society as a whole. Conflicts between managers and shareholders can exist. Debt holders have a different perspective from shareholders on what is important. Discuss what is at stake for all three groups (management, shareholders, debt holders).

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Value for shareholder can be referred to as the business owners’ financial worth received by them for shares owned in the firm. There can be a rise in the value of shareholder with earning of greater invested capital return in comparison to the weighted average capital cost. EPS (Earnings per share) of a firm is described as available earnings to common shareholders that is divided by outstanding shares of common stock. The ratio can be regarded as a chief indicator of value of shareholder of a firm. There is an increase in the ratio when earnings can be increased by the company and the company is viewed by the investors to be more valuable (Mauboussin, 2018).