The risk is that by trying to maximize your profits the quality of the products will drop and you will eventually lose sales
Under what conditions might profit maximization not lead to stock price maximization?"
A company that applies profit maximization is primarily focused on profit and will exhaust all its efforts to achieve the maximum profit possible. However, employing this strategy puts the firm to the risk of losing everything due to being so entrenched with widening its profitability.
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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
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.
Yes, profit maximization is the primary goal of a business. If a business doesn't maximize profits the Board of Directors can request that the CEO leave.
Under what conditions might profit maximization not lead to stock price maximization?"
Profit maximization includes some shortcomings like it ignores the risk that corresponds to the project's stream of cash flow. The timing of returns are ignored with this objective and it does not have as much relevance to a monopoly firm.
A company that applies profit maximization is primarily focused on profit and will exhaust all its efforts to achieve the maximum profit possible. However, employing this strategy puts the firm to the risk of losing everything due to being so entrenched with widening its profitability.
Not necessarily
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Profit maximization increase the graph of outputs.
Profit maximization can be both good or bad. Done correctly, profit maximization helps the company provide great products and services for customers.
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
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
Profit maximization includes some shortcomings like it ignores the risk that corresponds to the project's stream of cash flow. The timing of returns are ignored with this objective and it does not have as much relevance to a monopoly firm.
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