The primary purpose of any business is to maximize profit, or to make money. Profit is defined as:
Profit = Total Revenue from Sales - Total Expenses to make those Sales
In order to make profit, a business must sell something, either be product or service. So maximizing sale is only half of the equation. You also have to minimize expenses in order to maximize profit. If you have less money left after making sales and paying all your bills, you are worse off then when you started. Therefore, profit also have to be greater than zero. (i.e. not lose money).
Profit maximization IS an objective of a firm, but its not the ONLY objective. A firm will have different long term and short term goals which will vary depending on the current business cycle. If you need a more specific answer, please ask a more specific question. - Stavka
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.
The success or failure of a firm is measured in terms of the amount of profit it is able to earn in a competitive market. Under profit management, one has to study various theories of profit, emergence of profit, functions of profit and its measurement, etc.Thoeries underlying the Objective of a Firm, mainly talk about the subject of Ethics in Business. Debate is going on since a long time, as to whether every Firm's Objective needs to be ETHICAL? the answer may seem as simple as "YES", but the counter arguements that follow are difficult to answer.Coming to Profit Maximization, the question goes as to whether Profit Maximization Goal is justitfied? In a private enterprise, no one can have control over Profit maximization. If the profits are made with the use of Society's resources, such profits need to be sowed back for Societal Development.The profit-maximization rule applies both to firms that are able to sell their product at a constant price and to firms that find they must reduce the price of their product to increase sales. In the real world, firms have to engage in trial-and-error discovery processes, searching for the profit-maximization point. But the process can be succinctly described by the marginal revenue-marginal cost rule.Profit is what is left over from a business after the bills are paid. without profit the company can not afford to re-invest in capital or have money to pay stockholders. I think Customer satisfaction if the basic motive and objective of firm. When we will more and more consider to satisfy customer needs and wants, automatically our secondary objective "profit maximization" will be achieved.
Of course yes, if organization assum objectives of shareholders wealth maximization, it will struggle for profit maximization which will lead to more operations. operations of business needs employees, which will be hired from the society and the unemployment rate will decreased, on the other hand the organization will survive in long run and would meet the demands of the society as whole.... Haleem Graduate school of business University of gothenburg Sweden
A business' objective is to make money. They are in business to make money for their stockholders. They sell products and services to maximize their profits.
Profit maximization IS an objective of a firm, but its not the ONLY objective. A firm will have different long term and short term goals which will vary depending on the current business cycle. If you need a more specific answer, please ask a more specific question. - Stavka
a business organization is a group or a unit of people working together with a commen objective of profit maximization.but profit maximization is not the only objective..they also satisfy human needs and wants by producing goods and services
Because business take the long term aspects of the business and for that wealth maximization is more important than anything else.
Boasting or overconfident language
wealth is a resource in the production of goods & services in any economy.The maximization of wealth is a long term policy and would mean a higher utilization/employment of resources to bring about a higher level of national income. In any business wealth maximization is a long term financial effort to help and benefit the business environments & the all components in it.
Wealth maximization is a term that refers the process done by business that brings in high returns. For instance, making investments is an example of wealth maximization.
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.
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.
Profit maximization is the ONLY appropriate goal for a business. Even under a so-called "social responsibility" regime, a business only engages in such schemes because it thinks it can increase profits by doing so.
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
Not really its the only objective of every business. It's a prior or u can say most important objective of business. Once you start earning profit then you can achieve associated objectives to it easily. In result, business will grow further.
Thoeries underlying the Objective of a Firm, mainly talk about the subject of Ethics in Business. Debate is going on since a long time, as to whether every Firm's Objective needs to be ETHICAL? the answer may seem as simple as "YES", but the counter arguements that follow are difficult to answer. Does a Cigratte Manufacturing Company have an ethical objective? Are Liquior Producers into Ethical Business? These Companies thrive at the cost of Consumer's Health. Nevertheless they are highly Profit Making. Coming to Profit Maximization, the question goes as to whether Profit Maximization Goal is justitfied? In a private enterprise, no one can have control over Profit maximization. If the profits are made with the use of Society's resources, such profits need to be sowed back for Societal Development. Abnormal Profits/Supernormal Profits indicate the presence of Monopoly, new entrants and market expansion can keep a check on Monopoly, which is a matter of time. Gyan Prakash Singh er_gyanpsingh@yahoo.com 9336691851 MBA(IT)