ECONOMICS

Detailed explanation-1: -The shareholder value perspective is a school of thought that focuses on a company’s ability to offer value to its shareholders. This strategy may allow business professionals to prioritize decisions and policies that build financial wealth.

Detailed explanation-2: -Shareholder theory is the view that the only duty of a corporation is to maximize the profits accruing to its shareholders. This is the traditional view of the purpose of a corporation, since many people buy shares in a company strictly in order to earn the maximum possible return on their funds.

Detailed explanation-3: -Shareholder value is the value given to stockholders in a company based on the firm’s ability to sustain and grow profits over time. Increasing shareholder value increases the total amount in the stockholders’ equity section of the balance sheet.

Detailed explanation-4: -Shareholder value is created when a company’s profits exceed its costs. But there is more than one way to calculate this. Net profit is a rough measure of shareholder value added, but it does not take into account funding costs or the cost of capital.

Detailed explanation-5: -How to Create Shareholder Value. In order to maximize shareholder value, there are three main strategies for driving profitability in a company: (1) revenue growth, (2) increasing operating margin, and (3) increasing capital efficiency.