the 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.
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 wealth maximization is considered to be a more appropriate goal for the firm than profit maximization
it is operating cost
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.
what is ultimate goal of firms.
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
Profit maximization will result in due to the Higher earning of the targeted Company compared to its market value.This results in when the targeted company is issued lesser share compared to the EPS ratio determined exchanged share, before the merger.
What is comparison between profit and shareholder wealth?What is comparison between profit and shareholder wealth?
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."
Wealth maximization: To stay invested and multiply your invested money. The term is used for long-term investors. Short-term investors work for profit maximization. They sell their shares, as and when they get profit from the market.