Importance of Share Holder Value in any Company Research Paper

Importance of Share Holder Value in any Company - Research Paper Example The shareholder value approaches favorable strategies, by compelling managers to review business strategies based on prospective cash flows. The more company ability to generate cash, the more it can distribute to its shareholders. In short maximizing shareholders, wealth is equivalent to maximizing company’s price In order to attract capital equity easily, many companies focus more on establishing shareholder value. Capital equity is especially sensitive in those companies which are seeking to grow and operates in a risky environment. The profit margin varies from business to business as the nature and size of the business requires different kinds of resources. The business needs resources for its development and each of this development has a cost to bear. No matter what type of business is your need human and financial resources needed to establish it. It is utmost responsibility for the management of any company to provide quality resources at reasonable costs because they play a vital role in the business. Basically, the reduction in costs or expenses leads to the increase in the current income. Increase in current income means high-profit margins. High profits margins bring high yield for the Shareholders in the form of dividends and capital restructuring. It not only strengthens the company’s position but also boost up investor’s confidence. However, it should be considered that the reduction of costs or expenses cannot be incurred over a night. It’s a long and steady process and can be done with continuous management interest and efforts. Another important thing which needs to be considered is that the development of any company needs devotion of higher management. And that’s how it brings fruits to the Shareholders. And Shareholders ripe the benefits of their share in a long way. Many companies try to enhance their shareholders' return or value by risking  the equity base. This results in the loss of the value of its shares.