What Is Wealth Maximization?
A definition of wealth maximization would seem to be rather obvious, that being the accumulating as much wealth as possible. The truth is, any attempt to accumulate as much wealth as possible, by whatever means possible, is full of potential pitfalls. While wealth maximization can apply to individuals, it is usually considered to be a business term, associated with stockholders' shares in a company.
Wealth maximization is normally a long term objective, although in some instances, such as when a company is in the process of going out of business, or facing a takeover bid, a short term effort may be made to provide shareholders with as much value, or wealth, as is possible.
Wealth maximization is sometimes confused with maximizing profits, but the two are not the same. Companies are in business to make a profit, and the greater the profits are, the better off the company usually is, assuming the profits have been gained fairly and ethically. What really matters though, is not the quarterly profits statement, but the worth of the company at any point in time. Wealth, by definition is an abundance of valuable resources or assets. The wealth of a company is tied up in the property and facilities it owns including machines, computers, and the workforce. An experienced and well trained workforce adds to a company's wealth. Although the workforce may seem to be somewhat of an intangible asset, the shareholders see it differently, and see a skilled workforce, guided by a strong management team, as a strong indicator of a company's wealth.
An enlightened management team will always be doing things, or attempting to be doing things, designed to keep the shareholders happy. A bad decision on the part of management can have a devastating impact on the value of a company's shares, whereas a quarter featuring less than expected profits often causes a mere ripple. Stock prices may rise or fall dramatically preceding a takeover, based the shareholders' views as to whether the takeover is anticipated to increase or decrease a company's overall wealth.
Wealth Maximization 101 - Whether you're a corporate CEO or a homeowner, you have a vested interest in maximizing the accumulated wealth of either your corporation or your household, and if you were to take a course in wealth maximization, and all of the rules and techniques were distilled to the very basics, the same general rules would apply in either case.
You would learn how to best accumulate wealth efficiently, which is to say, the cost and effort of accumulating wealth needs to be both minimized and efficient. You'll need to set a value on the time and effort spent to accumulate wealth, and make certain you're getting your money's at the end of each day.
You would learn how to spend or distribute your wealth wisely, and when needed, replenish it. When you run out of assets, it can be very difficult, if not impossible, to build wealth again, much less maximize it.
In learning wealth maximization you would spend much time studying decision making strategies, and learning how to plan for any conceivable event.
It Isn't Just Dollars - In short, learning about wealth maximization and how to achieve it, isn't restricted to those in the 3-piece suits. It can apply to any business, large or small, private, public, or non-profit, and to households as well. It is in large part learning to distinguish between wealth and money. They are not one and the same. Wealth covers a lot more territory. Not just property and other assets, but touches on lifestyle as well. Wealthy people are usually happy people. Those who simply have lots of money aren't always the happiest or most fulfilled.