It is a very interesting question, all of us who have the job of moving forward the company we work for day by day.
Companies generally set short, medium and long-term goals, but the main objectives are twofold:
- Maximize the profits of the Companies. Maximize the wealth of the shareholders.
We must always keep these two objectives in mind to achieve the desired success.
We must carry out a financial analysis of the financial entity, we must be ethical with full compliance with the mission, vision and organizational objectives for which said Company was created.
We must elaborate a budget plan where Maximize the desired sales, buy only the necessary raw material, reduce the reduction in production, Minimize all expenses.
Once the financial statements are on hand, all the financial reasons are applied to them in order to know what liquidity the company has, in order to determine the availability of cash or the quick conversion to cash.
We will know the rotation period of our inventories, the time in which the inventory takes the form of a sale.
As well as the time it takes to cover the payment of our commitments.
In the same way we will know the time interval in which we are paid.
Therefore, we will determine the Debt Index, up to where we have the capacity to make commitments.
In summary, once all the financial reasons have been applied, we will know the real situation of the company, such as: if we need a goodwill, until what amount to request it, with which financial institution to request it and if it will be granted.
Likewise, if the financing is internal or we will use a financial product, this decision is the task of the Financial Manager to make it.
Similarly, higher earnings per share does not exactly mean a higher price per share. Sometimes companies obtain an increase in their profits without there being a variation in favor of the price of their shares, this happens only when the Maximization of Profits is accompanied by cash flows, increased futures, a higher share price is estimated is where the projected financial statements serve us.
The cash flow for the shareholder can be in cash or in dividends.
