What Should Be The Goal Of The Organization?

What Should Be The Goal Of The Organization?                 

1. Maximizing Profit

2. Maximizing Earnings per Share

3. Maximizing Market Price per Share

1. Maximizing Profit

     It means maximizing EAT (Earnings after Tax).

Under This Objective, a financial manager could show profit increases by issuing stock and 

using the proceeds to invest in Government Treasury bills. This would ultimately result in each owner's share of profits. It means that EPS (Earnings per Share) would fall.

Therefore this should not be the Goal of the organization.

2. Maximizing Earnings per Share

First of all, it is an improved version of profit maximization. However you cannot say that maximizing EPS is not also a complete appropriate goal because it does not specify the time limit or duration of expected returns. We must consider the

  Time Value of money.

  The risk associated with it.

    Whether we go for an investment project that will produce a 5000 Dollars return 5 years from now or go for an investment project that will produce annual returns of 800 Dollars in each of the next 5 years.

    Two organizations have the same EPS but if the earnings stream of one company is more risky than the other, than its market price per share may will be less.

Therefore we must analyze the time patterns of returns.

And the risk associated with these returns.

3. Maximizing Market Price per Share  

Market Price per Share represents
1.     Present account and expected future EPS
2.     Duration
3.     Risk associated with these earnings
4.     Dividend Policy 
5.     Other Factors that may affect the market price per share

Therefore, Maximizing market price share should be the main goal of the organization because it is just like a barometer for business performance. Market price per share shows that how well organization's management is doing on behalf of its shareholders.