Final answer:
The goal of a financial manager is to increase shareholder wealth by making decisions that enhance the company's long-term profitability. Shareholders use democratic voting to elect a board of directors who appoint the management team. Financial decisions can include borrowing or issuing stock, depending on various strategic factors.
Step-by-step explanation:
The goal of a financial manager is fundamentally to increase shareholder wealth. This is done by making decisions that contribute to the long-term growth and profitability of the company. While options such as maximizing earnings or minimizing expenses might contribute to this overarching goal, the primary objective is to enhance the wealth of the shareholders, who are the owners of the company.
Shareholders typically choose company managers through a voting process during annual general meetings or special meetings. As part of the company's governance structure, shareholders elect a board of directors who then appoint and oversee the company's management team.
Banks are called financial intermediaries because they facilitate the flow of funds between savers and borrowers. They accept deposits from savers and lend out these funds to individuals or businesses in need of capital.
In the context of raising funds for a major expansion of a small firm, the choice between borrowing (debt financing) and issuing stock (equity financing) would depend on several factors, including the cost of borrowing, the desire to maintain control of the company, and the potential return on investment that can be offered to shareholders.