Stock are the real owners of a corporation.They purchase stocks because they want to a good on their investment without under risk exposure. Stockholders first select directors who then hire managers to run the corporation on a day to day basis. Managers are supposed to be working on behalf of stockholders.So, financial managers need to know about the interest of the stockholders. There is no unanimity about that interest of stockholders. Some people believe that maximizing corporate profit is the interest of stockholders. On the other side, many people believe that maximizing this wealth is the interest of stockholders. Let is explain about these two interest short.

Profit Maximization

The profit maximization has been recognized as the goal of financoal management on the following grounds:

• Only those firms survive in the long run in a competitive amount of profit.
• Profit maximization is a time honored goal of a firm.
  
• It has been found extremely accurate in predicting certain aspect of a firm's behavior and trends.
• Profit is the most reliable measure of the efficiency of a firm.It is also the source of internal finance.
• Profit can be used as a performance evaluation criteria and profit maximization leads efficient allocation of resources.

Stockholders'Wealth Maximization
Wealth maximization is the superior goal to profit maximization due to the following reasons:

• Profit maximization goal ignores the timing of returns whereas stockholders' wealth maximization goal considers it.
• Profit maximization goal does not consider the risk or uncertainty of the prospective earning stream whereas stockholders' wealth maximization goal considers it.
  
• Benefits are measured in terms of cash flows. In investment and financing decisions, cash flow are more relevant than accounting profit.
• It is relevant to ling run.
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