Sure, profit maximization relates to profits *only* while shareholder wealth also involves total company equity, debt ratios and any of 15 other financial performance measure ratios. Management could focus on profit maximization over a longer period of time, say, 40 years (Toyota), while the shareholder would rather see stock values and corporate total value increase immediately (get in and get out) (90% of American manufacturers). If management focused on short-term profit maximization, say at the expense of long term sales revenues, then shareholder wealth (stock price) could actually decrease as a result of the loss of market share. The conflict of interests between shareholders and executives is an example of the "principle-agent problem."
Profit maximization means increase the over all asset of an organization where as wealth maximization of a share holder means enhance the value of the per share.
Regards,
Nandeep Singh
Yes, generally. Shareholders, or common equity, are only one component of a firm. A firm also has debt, and other hybrid components of its capital structure. Provided that the profits are accruing to shareholders, then yes it is congruent.
Keeping the gun on others shoulder & fire... Called maximization of share holder's wealth but corporate maximization is not only on asset & capital but to meet up the corporate social responsibilities and global network formation .
Shareholder wealth (more commonly referred to as shareholder
difference between corp wealth and shareholders wealth is dividend payout.
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.
Shareholder and stakeholder in a company are the investors and company assets holder respectively. So the wealth maximization in both cases is nothing but increase in the share value for shareholder and company profitability for stakeholder.
Corporation offering stocks ? Who can buy it ? 1- Other Corporations - Maybe Parent company to hold control 2- Individuals - make some money 3- Non corporate ? Who else remains ? .... Non-corporate means other legal forms of entities other than "corporation", like partnerships , limited liability companies .... but not individuals.
Profit maximization does not reflect (1) the timing of profits and (2) the riskiness of different operating plans. However, both of these factors are reflected in stock price maximization.
The main difference is that in the dynamic model the profit is reinvented allowing for more growth in the future, so it is a trade off between profit now or higher profits later, the management will need to get the shareholder to agree on that, a trust must be established between the shareholders and management. Hence, int he dynamic model, the minimum profit is not actually a constraint as it is in the static model.
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.
Shareholder and stakeholder in a company are the investors and company assets holder respectively. So the wealth maximization in both cases is nothing but increase in the share value for shareholder and company profitability for stakeholder.
differentiate between value for money and profit maximization
discount rate
The agency problem is a result of the separation between the decision makers and the owners of the firm. As a result managers may make decisions that are not in line with the goal of maximization of shareholder wealth.
Corporation offering stocks ? Who can buy it ? 1- Other Corporations - Maybe Parent company to hold control 2- Individuals - make some money 3- Non corporate ? Who else remains ? .... Non-corporate means other legal forms of entities other than "corporation", like partnerships , limited liability companies .... but not individuals.
A bondholder is a creditor to a company whereas a shareholder is a owner of a company.
the difference between Profit maximisation and share price maximisation
"Difference between sme and corporate client?"
Profit maximization does not reflect (1) the timing of profits and (2) the riskiness of different operating plans. However, both of these factors are reflected in stock price maximization.
any kind of difference between branch office and corporate office
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.