GENERAL KNOWLEDGE

Detailed explanation-1: -Briefly put, value maximization says that managers should make all decisions so as to increase the total long run market value of the firm. Total value is the sum of the value of all financial claims on the firm-including equity, debt, preferred stock and warrants.

Detailed explanation-2: -The main contender to value maximization is stakeholder theory, which argues that managers should attempt to balance the interests of all corporate stakeholders, including not only financial claimants, but employees, customers, communities, and governmental officials.

Detailed explanation-3: -Enlightened value maximization utilizes much of the structure of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders, and specifies long-term value maximization or value seeking as the firm’s objective.