Shareholder wealth maximization is pursuing the corporate objective of satisfying the shareholder of the firm by pursuing decisions that would add to the value of the shareholder and ensure his or her maximum satisfaction.

• The achievement of this objective is reflected in payment of regular dividend and ensuring share price appreciation. These indicators are themselves influenced by maximizing the profits of the firm.
• Profit conditions the size of dividend payment for firms and the market price of a share is influenced greatly by the earnings per share of that firm.
• Thus, pursing profit maximization that ensures adequate generation of operational cash flows would lead to shareholder wealth maximization.

A constraint can be a resource, a company policy or management mindset. The concept is applied to the allocation of scarce resources to reduce a company’s costs and improve profitability.

Satisficing: Bounded rationality may lead to satisficing. It is the condition where the search for an optimal solution is abandoned upon finding a satisfactory solution. Normally in satisficing, the course of action chosen only leads to the achievement of the minimum basic requirement but does not necessarily give you the best of options. A management accountant that is always interested in meeting the basic requirement will not assist his/her firm to be competitive in this changing world.

Optimizing: optimizing means looking for the best of options to pursue given the constraint faced by the decision maker. Optimal solution seeking takes time and effort but its rewards are enormous. It leads the organization to satisfy its shareholders and achieve competitive advantage. Decision tools like limiting factor analyses and linear programming are useful in making optimal decisions.