(a) EXPLAIN the advantages and disadvantages of both profit maximization and wealth maximization goals (b) EXPLAIN in brief the features of various…

(a) The table below highlights some of the advantages and disadvantages of both profit maximization and wealth maximization goals: Goal Objective Advantages Disadvantages Profit Maximization Large amount of profits (i) Easy to calculate profits (ii) Easy to determine the link between financial decisions and profits. (i) Emphasizes the short term gains (ii) Ignores risk or uncertainty (iii) Ignores the timing of returns (iv) Requires immediate resources. Shareholders Wealth Maximisation Highest market value of shares. (i) Emphasizes the long term gains (ii) Recognises risk or uncertainty (iii) Recognises the timing of returns (iv) Considers shareholders' return. (i) Offers no clear relationship between financial decisions and share price. (ii) Can lead to management anxiety and frustration. (b) Various types of Preference shares can be as below: Sl. No. Type of Preference Shares Salient Features 1. Cumulative Arrear Dividend will accumulate. 2. Non-cumulative No right to arrear dividend. 3. Redeemable Redemption should be done. 4. Participating Can participate in the surplus which remains after payment to equity shareholders. 5. Non-Participating Cannot participate in the surplus after payment of fixed rate of dividend. 6. Convertible Option of converting into equity shares.