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Can there be difference between profit maximization and shareholders wealth maximization?
Wiki User
∙ 12y ago
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
Wiki User
∙ 14y ago
Wiki User
∙ 15y agoThe two objectives of financial managment are (a) profit maximaization and (b) Wealth maximisation.
Profit mxaimisation - maximisation of profits irrespective of consiquences involved. It has few objections for examples 1. The term profit is vague, It does not clarify what exactly it mean it conveys different menaing to differnet people ie it may be short term profit or long term profit, it may be total profit or rate of profit 2. Ignores risk factor (higher the return higher will be the expected risk) 3. Ignres Time Value of Money (earlier the cash flows better it is) 4. Ignores social responsibility of business. Hence profit maximization is viewed as a limited objective ie essential but not sufficient.
Wealth maximization - The objective of the company should be to maximise its value or wealth. Wealth or value of the company is represented by the market price of its common stock. this value is the function of two factors 1. Likely earnings per share of the company 2. Capitalization rate. Therefore Value of the firm = EPS / Capitalization rate.
Hence wealth maximization is a better objective for business, since it represents both retrun and risk.
Wiki User
∙ 12y agothe difference between profit maximization and shareholders wealth maximization is that profit maximization is concern with profit that a company received based on inflow and outflow within a period while shareholders wealth maximization is concern with dividend and capital gain that shareholder received on a return of his/her investment.
Wiki User
∙ 16y agoWhat is comparison between profit and shareholder wealth?What is comparison between profit and shareholder wealth?
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What are the examples of profit maximization and maximization of shareholders profit?
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What is the difference between profit maximization and value maximization?
discount rate
Goal of the firm?
profit maximization &wealth maximization of shareholders.
Wealth maximization is a function of share price maximization discuss?
the difference between Profit maximisation and share price maximisation
What are the difference between value maximation and profit maximation?
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.
What are explanation of maximization of shareholders profit?
explain how to make the most money (profit) for stock owners of a company. A return on their investment.
What is maximazation of shareholders wealth and profit?
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.
What is the Difference between profit maximization and sale maximization?
The key difference between profit maximization and sales maximization focuses on the handling of costs/expenses. Sales maximization is a topline income statement action that attempts to maximize sales revenues. Sales maximization techniques are used in scale industries where the expense base is largely fixed and there are limited variable costs associated with acquiring the next dollar of sales. Profit maximization is a multiline income statement action that attempts to both maximize sales (as represented above) while minimizing expenses in order to maximize effective margin. Profit maximization techniques are used across a variety of industries.
What is the difference between profit maximization and wealth maximization?
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.
Differentiate between value for money and profit maximization concept in corporate governance?
differentiate between value for money and profit maximization
What is the difference between stock price maximization and price maximization?
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.
What is Three basic reasons is profit maximization inconsistent with wealth maximization?
Profit maximization is a narrow view which accounts for only the difference between sales and costs Wealth Maximization is broader and more philosophical in approach. Wealth maximisation includes not exhaustively culture , synergy, value, potential and wealth
