Financial goals: survey of experiences in India

Abstract

The Study aimed to test the existence of multiple financial goals and to find the relative significance of the financial goals pursued by companies in India. A questionnaire was sent to companies listed in the Investorsz Guide of Economic Times. Sixty one questionnaires were received back, of which fifty seven were found useful for analysis. The results of the study are: (1) Companies follow multiple financial objectives. The cumulative percentage of companies using two or more financial objectives is 100 per cent. (2) Out of the total respondent companies, only 19.3 per cent inter-alia consider maximization of market value per share in the financial decision-making. This objective is least considered in financial decision-making. (3) The overall rank ordering of the financial objectives suggest the following four objectives to be important: (a) maximization of operating profit before interest and taxes; (b) maximizing the rate of return on investment; (c) maximizing the growth rate in sales; and (d) ensuring that funds are available. (4) An international comparison of financial objectives reveal that yguarantee funds are availablez and ymaximization of EBITz have been ranked very high in France, Norway and India. Unlike in France, Netherlands and USA, Indian managers do not consider growth in EPS of high importance. It is also indicated that Indian managersz views on financial goals are significantly correlated with that of France, Japan and Norway.