What is the primary objective of liability management in corporate finance?

The primary objective of liability management in corporate finance is to optimize a company's capital structure. This involves strategically managing the company’s debt and equity mix to support its overall financial health and long-term objectives. By seeking an optimal capital structure, a company can minimize its cost of capital, enhance financial flexibility, and improve its ability to fund operations and growth.

Liability management focuses on how a company can manage its debt obligations effectively, including refinancing, restructuring, or repurchasing debt to better align with its financial strategy. The goal is not to eliminate all debt—since debt can be a useful tool for leveraging growth—but rather to ensure that the debt levels are sustainable and conducive to the company's risk profile and market conditions.

Increasing the number of shareholders or diversifying assets does not directly pertain to the objectives of liability management, as they focus more on equity ownership and asset distribution rather than the optimization of debt and overall financial structure.