What is the primary objective of a financial manager?

The primary objective of a financial manager is to increase the wealth of the company, which is fundamentally tied to maximizing shareholder value. This focus on wealth maximization encompasses various financial strategies that aim to improve the company’s profitability, make wise investment decisions, and optimize the capital structure, all of which contribute to the overall financial success and increase the market value of the company’s shares.

When a financial manager is dedicated to this goal, their decisions are geared towards undertaking projects and investments that promise a return greater than their costs and are aligned with the long-term vision of the company. This might include evaluating potential mergers and acquisitions, deciding on dividend payouts, or determining the best financing options for capital projects.

In contrast, reducing operating costs, maintaining market share, and enhancing employee benefits can all be important aspects of a company's operations but are typically considered means to an end rather than singular objectives. While these actions can contribute to the company’s overall wealth and performance, they do not represent the primary focus of a financial manager's role. Their overarching responsibility is to ensure the company's financial health and long-term profitability, which directly correlates to increasing its wealth.