 Financial Terms objective function

# Definition of objective function ## objective function

the linear mathematical equation that
states the purpose of a linear programming problem

# Related Terms:

## linear programming

a method of mathematical programming used to solve a problem that involves an objective function and multiple limiting factors or constraints long-term variable cost a cost that was traditionally viewed as a fixed cost

## optimal solution

the solution to a linear programming problem
that provides the best answer to the objective function

## Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.

## Consumption Function

The relationship between consumption demand and disposable income. More generally, it refers to the relationship between consumption demand and all factors that affect this demand.

## Financial objectives

objectives of a financial nature that the firm will strive to accomplish during the period
covered by its financial plan.

## functional classification

a separation of costs into groups based on the similar reason for their incurrence; it includes
cost of goods sold and detailed selling and administrative
expenses

## objective

a desired quantifiable achievement for a period of time ## Objective (mutual fund)

The fund's investment strategy category as stated in the prospectus. There are
more than 20 standardized categories.

## Probability density function

The probability function for a continuous random variable.

## Probability function

A function that assigns a probability to each and every possible outcome.

## Utility function

A mathematical expression that assigns a value to all possible choices. In portfolio theory the
utility function expresses the preferences of economic entities with respect to perceived risk and expected return.

## cost

the cash or cash equivalent value necessary to attain an
objective such as acquiring goods and services, complying
with a contract, performing a function, or producing and
distributing a product

## Tactical Asset Allocation (TAA)

An asset allocation strategy that allows active departures from the normal
asset mix based upon rigorous objective measures of value. Often called active management. It involves
forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of
fundamental variables, economic variables or even technical variables.