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Hello there,
I wanted to ask about a question by the examiner in December 2011 Q4 part D. The question asks to ‘compare and contrast the financial objectives of a stock exchange-listed company and the financial objectives of a not for profit organisation such as a large company.’
Having thought about this question long and hard, I was thinking that maximisation of shareholders wealth for the stock exchange-listed company would be applicable as a financial objective alongside the objective of making profit.
In terms of the financial objectives for the NFP organisation, I was thinking about VFM.
However, I found it a bit difficult to to find any similarities between the two.
Please could you help me in the right direction.
Thank you
You are correct in saying that for a company it is mainly profit and shareholder wealth, whereas for not-for-profit it is mainly value for money.
However, as the examiner points out in his answer, companies are also interested in value for money. In addition for both not-for-profit and for companies, maximising cash income is important.
Thank you John.
Ok, so for the company one would maximise the cash income by maximising the share price.
As for the NFP organisation, they need to ensure that they are funded in order to have the cash income they need to achieve their objectives as a charity.
For the NFP organisation – yes.
For the company, it is the other way round – they will want to maximise the cash in order to expand and/or increase dividend, and therefore increase the share price.
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