Stockholder Wealth Maximization

How? We first need to ask “ What factors determine the price of a company’s stock?”
Three factors:
- Any financial asset is valuable only if its generate cash flow
- timing of cash flow matters because cash received sooner is better- it can be reinvested to produce additional income
- Investors are averse (strongly opposed) to risk, they will pay more for a stock whose cash flows are relatively certain than for one with relatively risky cash flows

What to do?
Increasing cash flows
Speeding them up
Reducing their riskiness