Problems involved with the use of profit maximization as the goal of the firm due to numbers of reasons.
1 It ignore the timing of return.
2 It ignores the timing of returns.
3 It ignores the risk.
Explain the rationare for selecting shareholder wealth maximization as the objective of the firm.Include a consideration of profit maximization as an alternative goal
Under what conditions might profit maximization not lead to stock price maximization?"
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sales maximization technique is generally used in scale industries where base of the expenses is largelly fixed and where variable costs are limited. on the other hand profit maximization technique are used by variety of industries. total output is higher in sales maximization as compared to profit maximization
Value maximization and profit maximization are very much related, the main difference being- value maximization means increases in owners' wealth achieved by maximizing of the value of a firm's common stock. profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. the other difference among the two could be sited as- value maximization is seen as long term objective of a firm, whereas profit maximization is generally a short term objective.
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization
If the company is public listed (trades in the stock market) their aim is shareholder wealth maximization whereas for a privately owned firm a profit maximization objective is appropriate.
it is operating cost
Shareholder wealth (more commonly referred to as shareholder value) is talking about the value of the company generally expressed in the value of the stock. Profit maximization refers to how much dollar profit the company makes.
Uncertainity and timing are some of the problems
The primary objective of a firm is to maximize profit and shareholder value while meeting the needs of its customers and stakeholders, and operating in a sustainable and ethical manner. This involves making strategic decisions that optimize resources and generate long-term growth and success.
Explain the rationare for selecting shareholder wealth maximization as the objective of the firm.Include a consideration of profit maximization as an alternative goal
Profit maximization is short term as compare to share holder's wealth maximization, Managers should focus on Share holder's wealth maximization because its what they are hired for. also there are sevseal reasons such as.... 1) the share holders wealth is be considered.. 2)profit maximization doesnt say which type of profit it should maximize-short term or long term 3)profit maximization ignores the social values but only aims at earning maximum profit. 4)wealth maximization also considers improving the goodwill of the organization
The maximization of a shareholder's profit is at a point where the value of share is maximum and dividend on the share paid by the company is also very high but only few successful companies give such profit maximization to their shareholders and the listings of such companies can be found out on activetrader-links.com for investment purposes.
A firm cannot survive with mere profit maximization, but must increase long-term security through investment and meeting shareholder expectations. This will increase their productive capacity for the furture as well as encourage the risky capital investment of the shareholders.
Shareholder Wealth Maximization Model, unlike simple profit-maximization incorporates the time dimension and risk. The Shareholder-Wealth Maximization model (SWM) goal states that the objective of a firms management should be to maximize the present value of the expected future cash flows to equity owners (shareholders).Consider cash flows to be the same as profits. Hence, the value of a firms stock is equal to the present value of all expected future profits, discounted at the the shareholders required rate of return.
Shareholder Wealth Maximization Model, unlike simple profit-maximization incorporates the time dimension and risk. The Shareholder-Wealth Maximization model (SWM) goal states that the objective of a firms management should be to maximize the present value of the expected future cash flows to equity owners (shareholders).Consider cash flows to be the same as profits. Hence, the value of a firms stock is equal to the present value of all expected future profits, discounted at the the shareholders required rate of return.